The article focuses on some changes made in the required accounting procedures for some nonmonetary transactions in APB Opinion No. 29, entitled "Accounting for Nonmonetary Transactions," which was released in May 1973. For example, the opinion requires that nonreciprocal nonmonetary transactions, such as property dividends, be based upon fair values. Opinion No. 29 also affects reciprocal nonmonetary exchanges significantly. However, some parts of the opinion dealing with nonmonetary exchanges are quite difficult to interpret and even the new editions of intermediate accounting texts, which claim to include all thirty-one opinions of the Accounting Principles Board fail to present an adequate explanation of the effect of this opinion on accounting for reciprocal exchanges of nonmonetary assets between entities. In addition, there seems to be a common misconception that Opinion No. 29 prescribes accounting procedures for nonmonetary exchanges identical to those required for income tax reporting. Therefore, the purpose of this article is to summarize and explain those parts of the opinion, which deal with reciprocal exchanges of nonmonetary assets.

A number of new types of financial instruments have appeared in recent years, many of which have characteristics of both debt and equity. Accounting standards, however, have not specified the treatment of these hybrid securities for financial reporting purposes. As a result, companies have considerable latitude in how the instruments are reported, and some instruments have been designed in part for their financial reporting implications. One such instrument is the adjustable rate convertible note (ARCN). The treatment of ARCNs for both financial and tax reporting is discussed and an approach to accounting for ARCNs and other hybrid financial instruments is proposed which focuses on the substance of the instruments.

A number of different approaches are being used in reporting investment income from non-consolidated finance subsidiaries. Although finance subsidiaries tend to be fully consolidated when the parent is also a finance company, one non-finance parent in the study also consolidated its finance subsidiary. Of the various methods used in applying the equity method, only Method E (offsetting against interest expense) appears to be related to the circumstantial variables examined. This approach seems to be a novel substitute for consolidation. While other circumstantial variables might be examined, there is nothing to suggest additional variables that might have more explanatory power. In summary, the study indicates that the particular approach to reporting the operations of finance company subsidiaries under the equity method is related to the economic circumstances of the parent and subsidiary in only a few cases. In most other cases, there seems to be little justification for the specific equity-method approach (as distinguished from the equity method in general) used by the companies in the study. This diversity of reporting practices makes financial statement analysis and comparisons between companies much more difficult, especially since the financial statements contain little to clarify the underlying rationale for the procedures used. If a reduction in the number of reporting alternatives is of concern to the Financial Accounting Standards Board or other authoritative bodies, further clarification of the appropriate approach to reporting under the equity method appears to be in order.