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Statement of Financial Accounting Standards No. 130 - page 39 / 57

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\12/ Under SOP 90-7, "benefits realized from preconfirmation net operating

    loss carryforwards should first reduce reorganization values in excess

    of amounts allocable to identifiable assets and other intangibles

    until exhausted and thereafter be reported as a direct addition to

    paid-in capital."

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114. One respondent to the Exposure Draft contended that the amount

credited to paid-in capital for taxes not payable in cash represented a

"significant economic or cash flow benefit" and "is a change in equity from

nonowner sources."  Therefore, that respondent suggested that that amount

should be included as an item of other comprehensive income.

115. The Board agreed that the credit to paid-in capital resulting from

taxes not payable in cash is not a transaction with an owner.  However, the

Board decided that that credit derives from the accounting required upon

reorganization that results in adjustments to equity accounts based on

reorganization value.  Therefore, although taxes not payable in cash is not

a transaction with an owner, it does not qualify as comprehensive income

because the credit to paid-in capital stems from transactions and

accounting that took place upon reorganization.  In effect, the credit to

paid-in capital for taxes not payable in cash adjusts transactions that

were recorded in equity in an earlier period and does not result from the

current-period debit to income tax expense.  Therefore, the Board decided

that taxes not payable in cash should not be included as an item of other

comprehensive income.  In a broader-scope project, the Board may consider

whether the initial accounting upon reorganization that results in

adjustments to equity accounts based on reorganization value should result

in the recognition of comprehensive income.  If so, that would ultimately

affect the reporting of taxes not payable in cash as part of comprehensive

income.

Gains and Losses Resulting from Contracts That Are Indexed to a Company's

Shares and Ultimately Settled in Cash

116. One respondent to the Exposure Draft indicated that the Board should

consider whether a gain or loss arising from a contract that is indexed to

a company's shares and ultimately settled in cash should be considered as

an item of other comprehensive income.  EITF Issue No. 94-7, "Accounting

for Financial Instruments Indexed to, and Potentially Settled in, a

Company's Own Stock,"\13/ addresses four types of freestanding contracts

that a company may enter into that are indexed to, and sometimes settled

in, its own shares: (a) a forward sale contract, (b) a forward purchase

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