Wiley GAAP 2008

Endnotes

¹FAS 150 contains a provision requiring reporting entities that issue mandatorily redeemable common stock to classify these instruments as liabilities in the balance sheet. Implementation of this provision adversely affected many privately held businesses whose common stock was subject to “buy‐sell” agreements that obligated the reporting entity to redeem the owners' stock upon the event of their death. Application of FAS 150 would have required that 100% of these companies' equity be classified as liabilities, causing many of them to be in violation of restrictive debt covenants, or leaving them unable to obtain credit enhancements such as guarantees, letters of credit, or surety bonds.

²Insurance contracts that require or permit the insurer to settle claims by providing goods or services instead of by paying cash are not, by definition, financial instruments. Similarly, warranties that require or permit the warrantor to settle claims by providing goods and services in lieu of cash do not constitute financial instruments.

³SOP 05‐1 defines a nonintegrated contract feature in an insurance contract as a feature in which the benefits provided are not related to or dependent on the provisions of the base contract. For the purposes of applying the FVO election, neither an integrated nor a nonintegrated contract feature or coverage qualifies as a separate instrument.

⁴APB 18 indicates that management of the investor is to evaluate the significance of an investment to its financial ...