FASB Proposes Guidance on Measurement of Paid-in-Kind Dividends

The FASB has issued a proposed Accounting Standards Update (ASU) that would amend ASC 505 to add guidance on how an issuer should measure paid-in-kind (PIK) dividends on equity-classified preferred stock. Under the proposed amendments, entities would be required to measure such dividends by multiplying the PIK dividend rate by the liquidation preference of the shares.

The proposal is limited to the measurement of PIK dividends and does not address recognition. By providing clear guidance on how to measure PIK dividends, the Board expects that comparability between entities will improve.

Comments on the proposed ASU are due by October 27, 2025. For more information, see the press release on the FASB’s Web site.