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Statement of Financial Accounting Standards No. 130 - page 38 / 57

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are debited.  Transactions in which unearned ESOP shares are credited and

compensation cost is debited have both equity and expense characteristics.

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\11/ SOP 93-6 superseded SOP 76-3 and is required for ESOP shares acquired

    after December 31, 1992.  Employers are permitted, but not required,

    to apply the provisions of SOP 93-6 to shares purchased by ESOPs on

    or before December 31, 1992, that have not been committed to be

    released as of the beginning of the year of adoption.

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111. The Board agreed that it could be argued that the direct reductions to

shareholders' equity under Opinion 25 and SOP 93-6 that will eventually be

recognized as compensation expense are items of other comprehensive income.

However, because those transactions involve the company's own stock, an

argument also could be made that those are transactions with owners and

hence are not other comprehensive income.  In other words, those types of

transactions have both equity (transaction with owners) characteristics and

expense (comprehensive income) characteristics.

112. The Board concluded that it was beyond the scope of the project to

determine whether deferred compensation expense and reductions to equity

related to ESOPs were items of other comprehensive income.  Therefore,

until it makes a definitive decision about those items in a broader-scope

project on comprehensive income, those transactions are to be considered as

equity transactions and are not to be included as other comprehensive

income.

Taxes Not Payable in Cash

113. A reorganized enterprise may suffer net operating losses prior to

reorganization that provide it with significant tax advantages going

forward. SOP 90-7, Financial Reporting by Entities in Reorganization Under

the Bankruptcy Code, requires that a reorganized enterprise record a "full

tax rate" on its pretax income although its actual cash taxes paid are

minimal because of those net operating loss carryforwards.  "Taxes not

payable in cash" are reported in the income statement as an expense with a

corresponding increase to paid-in capital in shareholders' equity.\12/

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