Recapitalizations 1.

28 Paragraph B24 of Statement 141 states, in part, that “[t]he Board acknowledged,
as it did prior to issuing the 1999 Exposure Draft, that this Statement does not address many current
practice issues, such as accounting for recapitalization transactions.” In a recapitalization transaction, a
series of steps is generally undertaken involving the equity of an entity, which may result in the
establishment of a new controlling shareholder. In a leveraged recapitalization, new debt is issued with
the proceeds used to redeem shares from existing shareholders as part of a series of steps that also may
result in the establishment of a new controlling shareholder

Transactions Between Entities Under Common Control 1.29 Paragraph 11 of Statement 141 provides
that “[t]he term business combination as used in this Statement also excludes transfers of net assets or
exchanges of equity interests between entities under common control.” Paragraph D11 of Statement
141 provides the following examples of those types of transactions: a. An entity charters a newly formed
entity and then transfers some or all of its net assets to that newly chartered entity. b. A parent
company transfers the net assets of a wholly owned subsidiary into the parent company and liquidates
the subsidiary. That transaction is a change in legal organization but not a change in the reporting entity.
c. A parent company transfers its interest in several partially owned subsidiaries to a new wholly owned
subsidiary. That also is a change in legal organization but not in the reporting entity. d. A parent
company exchanges its ownership interests or the net assets of a wholly owned subsidiary for additional
shares issued by the parent’s partially owned subsidiary, thereby increasing the parent’s percentage of
ownership in the partially owned subsidiary but leaving all of the existing minority interest outstanding.