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March 18, 2026The Accounting Review

Establishing the Common Stock Equivalence of Convertible Bonds.

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Authors

BGBruce R. GaumnitzSt. Cloud State UniversityJTJoel E. ThompsonCollege of Wooster

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Implication

This analysis compares market-based tests for convertible bonds' equivalence to traditional accounting rules, indicating significant discrepancies.

Key Points

  • The research aims to develop a market-based statistical test to determine if convertible bonds qualify as common stock equivalents for earnings calculations.
  • Utilized a market-based statistical test to assess common stock equivalence of convertible bonds.
  • Examined a randomly selected sample of convertible bonds for analysis.
  • Compared findings with APB/FASB classification rules.
  • Detected little agreement between APB/FASB classifications and market test results for convertible bonds.
  • Identified that existing rules may not effectively classify convertible bonds as common stock equivalents.

Cite This Study

Gaumnitz et al. (1987) studied this question.

synapsesocial.com/papers/69ba42dc4e9516ffd37a37fbhttps://doi.org/10.2308/tar-4496185
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Also Consider

Synapse has enriched 5 closely related papers on similar clinical questions. Consider them for comparative context:

  1. 1Determining Common Stock Equivalency of Convertible Securities: A Teaching Approach.1987
  2. 2The APB, Yield Indices, and Predictive Ability: A Reply.1971
  3. 3Option 15 vs. A Comprehensive Financial Reporting Method for Convertible Debt.1971
  4. 4Convertible Debt and Earnings per Share: Pragmatism vs. Good Theory.1970
  5. 5The Effects of Accounting Principles Board Opinion No. 15 on Earnings Per Share: A Simulation Study.1972