Customized Stock Buybacks Resume After Accounting Change Wall Street Journal Online (09/27/00) Vol. 5, No. 17 p.A12; Cowan, Lynn
Customized stock buybacks have been revitalized
following a lull that resulted from a new bookkeeping treatment,
but the recovery may be short-lived if a different and larger
accounting overhaul is passed. The first lull came as the
Financial Accounting Standards Board (FASB) Emerging Issues Task
Force issued a new accounting interpretation, but the market for
the buybacks resumed when the task force refined its position.
While the task force again repositioned its stance on the issue,
the market did not react one way or the other, as the financial
world focused on another FASB project that looms on the horizon.
Specifically, the accounting world is concerned over the
treatment of structured stock buybacks as equity on income
statements instead of as assets or liabilities. Removing the
equity classification is dangerous, with earnings becoming more
volatile, since companies report shifts in the instruments' value
every quarter. Also on the horizon is the FASB's equity and
liability project, which could have an effect on accounting for
products such as forward share repurchase agreements.