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On the Radar — Distinguishing Liabilities From Equity

Published on: 01 Apr 2021

Entities raising capital must apply the highly complex, rules-based guidance in U.S. GAAP to determine whether the securities they issue are classified as liabilities, permanent equity, or temporary equity. To reach the proper accounting conclusion, they must consider key questions regarding the appropriate unit of accounting, whether the instrument contains certain obligations, and whether such obligations (if they exist) are conditional or unconditional.



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