Proposal Aims to Give Stock Investors More Accounting Clarity

U.S. accounting rulemakers issued a narrow proposal to clarify how businesses buying stock in other businesses should measure certain types of equity securities.

The July 30 proposal from the Financial Accounting Standards Board stems from a year-old request from PricewaterhouseCoopers LLP. The Big Four firm asked the board to clarify when businesses must follow the measurement rules—in what is called the equity method of accounting—versus broader guidelines dealing with the classification and measurement of financial instruments.

Many companies have transactions, depending on their terms, which toggle between the two guidelines, the firm wrote.

“We believe that this is a pervasive ...