The Economic Consequences of the Statement of Financial Accounting Standards (SFAS) No. 150

摘要

SFAS No. 150, "Accounting For Certain Financial Instruments with Characteristics of Both Liabilities and Equity" (SFAS 150), requires companies to report mandatorily redeemable preferred stock (MRPS) as a liability, and the dividends on these securities as interest expense. The purpose of this study is to examine the economic consequences of SFAS 150's adoption on a sample of public companies. Our analysis indicates that adoption resulted in both intended and possible unintended economic consequences. Specifically: (1) the impact of SFAS 150 on non-public companies caused the FASB to review its position on the disclosures concerning MRPS; (2) some companies redeemed their MRPS prior to the adoption date of the standard; and (3) approximately 4% of sample firms were required to disclose MRPS as a liability.