Comment: Measuring PIK dividends on equity-classified preferred stock

In our comments responding to the FASB’s proposed ASU, Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock (Topic 505, Equity), we support the proposal and believe it would (1) provide much-needed guidance for measuring paid-in-kind (PIK) dividends on equity-classified preferred stock, and (2) reduce diversity in practice.

We have suggested some revisions, however, that we believe will improve the proposed guidance, such as clarifying the scope guidance in ASC 505-10-15-3 to align the description of PIK dividends in ASC 505-10-15-2(e) with the definition of a “stock dividend” so that users understand the issuer is satisfying a “dividend obligation” rather than a “dividend.” We also believe that entities other than public business entities should be given an additional year to adopt the final guidance, consistent with the FASB’s Private Company Decision Making Framework.

Read our comments in full here.