EITF Reaches Consensus to Account for Elective Stock/Cash Dividends as a Stock Issuance

On November 19, 2009, the Financial Accounting Standards Board's (FASB) Emerging Issues Task Force (ETIF) reached a consensus that the stock portion of elective stock/cash dividends would be accounted for as a stock issuance. This accounting treatment would include the stock portion of the dividend arrangement prospectively in reported per share amounts. The stock portion would be considered contingently issuable shares until paid under the current earnings per share guidance. The EITF also concluded that companies would report the stock portion of these elective dividends as a liability on the balance sheet when there is an obligation to pay shareholders in stock. The EITF will provide further guidance for the accounting and reporting of these liabilities at a later time. If the EITF's consensus is ratified by the FASB, it would be effective for interim and annual periods ending on or after December 15, 2009.

Under 2008 and 2009 IRS Revenue Procedures, the elective stock/cash dividends are available to listed REITs to satisfy their dividend requirements through 2009. The REITs that have previously offered these elective stock/cash dividends to their shareholders have equally accounted for the stock portion of the dividends on a retrospective or prospective basis when reporting per share amounts. As a result of the diversity in reporting these dividends, the EITF examined this presentation issue, including the effects of the dividends on the calculation of per share amounts. On September 30, the EITF exposed for public comment its original position to apply the stock portion of these dividends retrospectively. NAREIT urged members to provide their views to the EITF on the proposal. As a result of the users' views and comment letters received that favored the prospective treatment, the EITF reversed its initial decision and concluded that the stock portion of the dividends would be reported prospectively in per share amounts.