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Cited by 19Accounting Theory and Financial ReportingAuditing, Earnings Management, GovernanceCorporate Finance and Governance

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Accounting for financial instruments with characteristics of debt and equity: finding a way forward

Fargher, Neil, Sidhu, Baljit K., Tarca, Ann, van Zyl, Warrick·2019·Accounting & Finance
DOI 10.1111/acfi.12280
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Abstract

Accounting for compound financial instruments, that is those with characteristics of both debt and equity, has challenged accounting standard setters for decades. The principles developed to distinguish liabilities and equity and the application of these principles in IAS 32 have been widely criticised. In 2016–2017, the IASB was engaged in a project to improve IAS 32. Our study presents research that is relevant to the issues faced by standard setters, related to improving the definitions and enhancing presentation and disclosure of liabilities and equity. We discuss studies investigating the effects of the accounting classification requirements on firms’ financing choices and on users’ decision‐making, to examine the question, ‘Does the distinction matter?’ We then explore various approaches that may be pursued by the standard setters to improve accounting in this area and identify areas for future research.

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Metadata

Authors
Fargher, N., Sidhu, B. K., Tarca, A., & van Zyl, W.
Affiliations
  • Australian National University (AU)
  • The University of Sydney (AU)
  • The University of Western Australia (AU)
Corresponding author
Fargher, Neil
ORCID
Venue
Accounting & Finance
Publisher
Wiley
Published
2018-08-16
Volume
59
Issue
1
Pages
7-58
ISSN
  • 0810-5391 (ISSN-L)
  • 1467-629X
DOI
10.1111/acfi.12280
OpenAlex
W2887675866
Cited by
19
References
58
Citations by year
2026: 1 · 2025: 5 · 2024: 2 · 2023: 1 · 2022: 4 · 2021: 3 · 2020: 2 · 2019: 1
FWCI
3.93
Type
journal article
Language
en
Open access
closed
Licence
onlinelibrary.wiley.com/termsAndConditions#vor (vor)
Locations
  • Accounting and Finance (publishedVersion)
  • UWA Profiles and Research Repository (UWA) (submittedVersion)
  • ANU Open Research (Australian National University) (submittedVersion)
Topics
  • Social Sciences › Business, Management and Accounting › Accounting › Accounting Theory and Financial Reporting
  • Social Sciences › Business, Management and Accounting › Accounting › Auditing, Earnings Management, Governance
  • Social Sciences › Economics, Econometrics and Finance › Finance › Corporate Finance and Governance
Keywords
debt-equity distinction, IAS 32, financial disclosure, financing decisions, user decision-making, accounting standards reform

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CoChat. (2026). Citation check: Accounting for financial instruments with characteristics of debt and equity: finding a way forward. https://app.cochat.ai/papers/10.1111/acfi.12280
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Fargher, N., Sidhu, B. K., Tarca, A., & van Zyl, W. (2019). Accounting for financial instruments with characteristics of debt and equity: finding a way forward. Accounting & Finance. https://doi.org/10.1111/acfi.12280