Since the release in 2003 of Statement of Financial Accounting Standard 150 (SFAS150), accounting for certain financial instruments with characteristics of both liabilities and equity, intermediate accounting textbooks now include mandatorily redeemable preferred stock (MRPS) as a financial instrument requiring liability classification. MRPS is not legal debt in the traditional sense, but is classified as debt because its characteristics make it essentially equivalent to debt. This paper presents a series of teaching modules which, building on standard coverage of long-term debt and contributed capital, are designed to increase students' understanding of the essential characteristics of financial instruments. Completion of the modules will allow students to understand provisions of SFAS150 and prepare them for further standards developed in the Financial Accounting Standards Board's ( FASB) financial instruments project. The approach enhances the skills students need for entry into the accounting profession, such as conceptual thinking, working in groups, written and oral communication, and applied professional research.
"Capstone Approach For Teaching Financial Instruments In Intermediate Financial Accounting,"
Journal of Business & Leadership: Research, Practice, and Teaching (2005-2012): Vol. 2
, Article 20.
Available at: https://scholars.fhsu.edu/jbl/vol2/iss1/20