FASB Proposes Guidance on Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock
September 30, 2025
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.