7252569-MIdterm-1 (dragged) 58

7252569-MIdterm-1 (dragged) 58 - Kieso Weygandt Warfield...

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Kieso, Weygandt, Warfield, Young, Wiecek Intermediate Accounting, Eighth Canadian Edition 16-3 CHAPTER REVIEW Introduction Complex financial instruments, once uncommon, are now widely used by companies in an effort to manage risk, access pools of financing, and minimize cost of capital and taxes. In response to this trend, the accounting profession has developed a new framework for dealing with these instruments in the financial statements Chapter 16 focuses on complex financial instruments, including derivatives, which are discussed separately. Since employee compensation plans often include the issuance of derivatives such as stock options, this topic is also discussed. Presentation and Measurement Issues 1. Compound financial instruments have attributes of both equity and debt. They are sometimes referred to as hybrid instruments because of these dual attributes. Convertible and perpetual debt are examples. With these instruments, the main accounting complexity lies in determining how to classify them on the balance sheet. Users rely on the
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