Financial instruments

The accounting for financial instruments seems to be in a constant state of change. From credit losses to reference rate reform, companies are continuously updating their financial statements and processes. See how these projects could impact your company.

  • At the beginning of 2020, calendar year public companies that are SEC filers adopted the new credit losses standard. The FASB deferred the adoption date to 2023 for all other calendar year entities. 
  • Explore PwC's latest thinking on CECL in our Loans and investments guide.
  • The London Interbank Offered Rate (LIBOR) is one of the most commonly used reference rates in the global financial markets along with other interbank offered rates (IBORs). However, the United Kingdom’s Financial Conduct Authority announced that it would no longer persuade or compel banks to submit LIBOR as of the end of 2021. Other jurisdictions are similarly working towards replacing other IBORs. IBORs are frequently used in financial instruments, such as debt agreements, investments, and derivatives, but may also be present in leases, compensation arrangements, and contracts with customers. IBOR reform will likely impact all companies including those outside of the financial services sectors. 
  • The FASB issued ASC 848, which provides relief that, if elected, will require less accounting analysis and less accounting recognition for certain modifications to contracts and agreements as a result of reference rate reform. It also introduces a number of optional expedients to address accounting issues specific to hedge accounting. 

Convertible debt and certain equity contracts

  • A final standard is expected soon that will simplify the accounting for convertible instruments, among several other items. Most convertible instruments will be reported as a single liability or equity instrument with no separate accounting for embedded conversion features unless required by the derivatives guidance. In addition, certain amendments to the guidance on equity contracts are expected to result in more equity contracts being classified in equity. The upcoming guidance will also simplify the diluted earnings-per-share calculation.

Also, listen to our podcast episodes below on implementing the CECL standard

Think the new credit losses (CECL) standard doesn’t impact non-financial companies? We explain why it impacts all companies and share lessons learned.

CECL - Impacts for nonfinancial services companies

How will CECL impact nonfinancial services companies? Watch our latest video for a quick summary.

Financial services companies will be broadly impacted by the FASB’s new CECL impairment model for financial assets. Further, nonfinancial services companies also hold financial assets that will be subject to the new model. In this video we cover how the new CECL model would be applied to (1) trade receivables, (2) lease receivables, (3) other financial instruments, as well as (4) updates to the impairment guidance for available-for-sale securities.

Duration: 00:06:33

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Heather Horn

Heather Horn

US Strategic Thought Leader, National Professional Services Group, PwC US

David Schmid

David Schmid

International Accounting Leader, National Professional Services Group, PwC US

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