The FASB has been struggling with the issue of determining the difference between debt and equity financing for nearly twenty years.The Board is concerned that many provisions of U.S.GAAP conflict with the definition of a liability given in the Conceptual Framework.As a result,the Board is considering a new approach to distinguishing between debt and equity financing.
The method currently favored by the FASB is called the "basic ownership approach."
Required:
Explain the basic ownership approach and identify what effects,if any,this approach would have on financial accounting and reporting.

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The Answer of The FASB has been struggling with the issue of determining the difference between debt and equity financing for nearly twenty years.The Board is concerned that many provisions of U.S.GAAP conflict with the definition of a liability given in the Conceptual Framework.As a result,the Board is considering a new approach to distinguishing between debt and equity financing.
The method currently favored by the FASB is called the "basic ownership approach."
Required:
Explain the basic ownership approach and identify what effects,if any,this approach would have on financial accounting and reporting.

The FASB Has Been Struggling with the Issue of Determining