FASB Issues Guidance on Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock

The FASB has issued Accounting Standards Update (ASU) No. 2026-01, Equity (Topic 505): Initial Measurement of Paid-in-Kind Dividends on Equity-Classified Preferred Stock, which amends ASC 505 to add guidance on how an issuer should measure paid-in-kind (PIK) dividends on equity-classified preferred stock. Under the amendments, entities are required to measure such dividends by multiplying the stated PIK dividend rate by the liquidation preference of the shares. The ASU’s requirements are limited to the measurement of PIK dividends and do not address recognition.

For more information, see the press release on the FASB’s Web site.