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Statement of Financial Accounting Standards No. 130 - page 40 / 57





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contract, (c) a purchased put option, and (d) a purchased call option.

Those contracts may be settled by physical settlement, net share

settlement, or net cash settlement.


\13/ Issue 94-7 was combined with and codified in EITF Issue No. 96-13,

    "Accounting for Sales of Options or Warrants on Issuer's Stock with

    Various Forms of Settlement."


117. Issue 94-7 indicates that contracts that give the company a choice of

net cash settlement or settlement in its own shares are equity instruments

and should be measured initially at fair value.  If such contracts are

ultimately settled in cash, the amount of cash paid or received should be

an adjustment to contributed capital.  The Board considered whether the

amount of cash paid or received (which represents a loss or gain on the

contract) should be included as an item of other comprehensive income.

118. In Issue 94-7, the Emerging Issues Task Force reached a consensus that

contracts that give the company a choice of net cash settlement or

settlement in its own shares are equity instruments.  Comprehensive income

excludes all changes in equity resulting from investments by owners.

Therefore, the Board decided that until it addresses that issue in a

broader-scope project, a net cash settlement resulting from a change in

value of such a contract should be treated as a change in value of an

equity instrument and should not be considered as an item of comprehensive


Other Paid-in Capital Transactions Not Addressed

119. The Board recognizes that there may be other transactions that are

reported as direct adjustments to paid-in capital or other  equity accounts

that have characteristics similar to items that the Board has identified as

other comprehensive income.  Instead of addressing those transactions on a

piecemeal basis, the Board decided that transactions required by generally

accepted accounting principles to be recognized in paid-in capital or other

similar nonincome equity accounts are not to be displayed as other

comprehensive income.  However, the Board may collectively address those

types of transactions in a broader-scope project on comprehensive income.

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