Have you considered early adopting ASU 2020-06? PwC summarizes the FASB’s new guidance intended to simplify accounting for certain financial instruments with characteristics of liabilities and equity.
Instruments that have characteristics of both liabilities and equity (such as convertible debt) are commonly issued by companies to raise capital from investors seeking certain return profiles. Preparers and users of financial statements have long noted that the accounting models for these instruments are complex, rules based, and can result in different accounting and reporting for instruments with similar economics.
The FASB recently issued guidance that simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The Board reduced the number of accounting models for convertible debt and convertible preferred stock instruments and made certain disclosure amendments to improve the information provided to users. In addition, the Board amended the derivative guidance for the “own stock” scope exception and certain aspects of the EPS guidance.
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