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.


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