(Solved Homework): Can someone please summarize this from "the top 10 reasons to fix the FASB's conceptual framework"…

Can someone please summarize this from “the top 10 reasons to fix the FASB’s conceptual framework”

Another CFW shortcoming is its definition of liabilities, which didn’t anticipate the growing popularity of using equity-based derivative instruments to create obligations.

Don't use plagiarized sources. Get Your Custom Essay on
(Solved Homework): Can someone please summarize this from "the top 10 reasons to fix the FASB's conceptual framework"…
Get an essay WRITTEN FOR YOU, Plagiarism free, and by an EXPERT!
Order Essay

This definition could be revised to include all call


options because they obligate a company to deliver shares at a discount. It should also include all other arrange- ments that similarly obligate the company to deliver fixed or variable numbers of its own shares at predetermined prices or in response to pre-established conditions.

Reporting these instruments as equity erroneously ignores the crucial fact that they don’t yet endow their holders with fundamental ownership rights to dividends and voting power. They’d be most usefully reported as liabilities until ownership rights are bestowed on their holders, which, in the case of call options, doesn’t happen until they are exercised.

We think useful information is suppressed when these instruments are reported as if they create equity or, what’s worse, are left off the statements entirely. Under today’s GAAP, these instruments linger stealthily in the issuer’s equity section or off the balance sheet; with this change, they could be presented above the mezzanine as full-blown debts at their current market value, regardless of their volatility. We propose the following (our modifi- cations are italicized):

“Liabilities are probable future sacrifices of economic benefits arising from present obligations of a particular entity to transfer assets or provide services or deliver equity-based financial instruments to other entities in the future as a result of past transactions or events.”

The definition would include among liabilities all oblig- ations to deliver equity or derivative instruments where the underlying is the reporting entity’s own securities. Although their value may not be known with certainty, the company is obligated to make an economic sacrifice in the future because of what happened in the past.

Expert Answer


Homework Ocean
Calculate your paper price
Pages (550 words)
Approximate price: -

Why Work with Us

Top Quality and Well-Researched Papers

We always make sure that writers follow all your instructions precisely. You can choose your academic level: high school, college/university or professional, and we will assign a writer who has a respective degree.

Professional and Experienced Academic Writers

We have a team of professional writers with experience in academic and business writing. Many are native speakers and able to perform any task for which you need help.

Free Unlimited Revisions

If you think we missed something, send your order for a free revision. You have 10 days to submit the order for review after you have received the final document. You can do this yourself after logging into your personal account or by contacting our support.

Prompt Delivery and 100% Money-Back-Guarantee

All papers are always delivered on time. In case we need more time to master your paper, we may contact you regarding the deadline extension. In case you cannot provide us with more time, a 100% refund is guaranteed.

Original & Confidential

We use several writing tools checks to ensure that all documents you receive are free from plagiarism. Our editors carefully review all quotations in the text. We also promise maximum confidentiality in all of our services.

24/7 Customer Support

Our support agents are available 24 hours a day 7 days a week and committed to providing you with the best customer experience. Get in touch whenever you need any assistance.

Try it now!

Calculate the price of your order

Total price:

How it works?

Follow these simple steps to get your paper done

Place your order

Fill in the order form and provide all details of your assignment.

Proceed with the payment

Choose the payment system that suits you most.

Receive the final file

Once your paper is ready, we will email it to you.

Our Services

No need to work on your paper at night. Sleep tight, we will cover your back. We offer all kinds of writing services.


Essay Writing Service

No matter what kind of academic paper you need and how urgent you need it, you are welcome to choose your academic level and the type of your paper at an affordable price. We take care of all your paper needs and give a 24/7 customer care support system.


Admission Essays & Business Writing Help

An admission essay is an essay or other written statement by a candidate, often a potential student enrolling in a college, university, or graduate school. You can be rest assurred that through our service we will write the best admission essay for you.


Editing Support

Our academic writers and editors make the necessary changes to your paper so that it is polished. We also format your document by correctly quoting the sources and creating reference lists in the formats APA, Harvard, MLA, Chicago / Turabian.


Revision Support

If you think your paper could be improved, you can request a review. In this case, your paper will be checked by the writer or assigned to an editor. You can use this option as many times as you see fit. This is free because we want you to be completely satisfied with the service offered.

× Contact Live Agents