To discourage unfriendly takeover attempts, a reporting entity may grant its existing shareholders rights which convert to the reporting entity’s common stock upon the occurrence of specified events, such as the accumulation of a significant percentage of the reporting entity’s outstanding shares by a single shareholder. These rights are often referred to as “poison pill” takeover defenses. The issuance of rights to existing shareholders on a pro rata basis is typically accounted for as a dividend with the offsetting entry recorded to APIC, if the rights meet the requirements for equity classification, or as a liability, if they do not meet the requirements for equity classification. See FG 5.2 for information on the analysis of equity-linked instruments.