Adopting the new guidance on down round features

In depth , PwC US Mar 26, 2018

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The FASB has taken some of the bite out of down round features. We explain the impact of new accounting guidance.

Overview

In 2017, the FASB issued new guidance that changes the accounting for warrants or convertible instruments that include a down round feature. Under the new guidance, equity classification will no longer be precluded and fair value accounting is not required solely due to the existence of a down round feature. Although the guidance is not required to be adopted until January 1, 2019 (for public business entities), many companies are considering early adoption.

Companies planning for adoption should evaluate adjustment provisions carefully to be sure that they meet the definition of a down round and should not underestimate the amount of effort that could be required to implement the new guidance.

To have a deeper discussion on down round features, please contact:

John Bishop

Partner, National Professional Services Group, PwC US

Email

Chip Currie

Partner, National Professional Services Group, PwC US

Email

John F. Horan

Managing Director, National Professional Services Group, PwC US

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David Schmid
IFRS & US Standard Setting Leader, National Professional Services Group, PwC US
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