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The FASB proposed simplifying an issuer’s accounting for financial instruments with characteristics of liabilities and equity by eliminating the requirements in ASC 470-20 to separately account for embedded conversion features in convertible instruments. Only embedded conversion features requiring bifurcation under ASC 815-15 would be accounted for separately. For contracts in an entity’s own equity, the proposal would require entities to disregard certain events that would trigger an adjustment to the contract’s settlement amount and any events that would trigger net cash settlement, if the likelihood of the event occurring is remote under ASC 815-40. It also would eliminate some of the conditions for equity classification under ASC 815-40-25. The proposal also would require entities to use the if-converted method for all convertible instruments in the diluted earnings per share calculation and presume share settlement for instruments that may be settled in cash or shares, except for liability-classified share-based payment awards. Comments are due by 14 October 2019.
To the Point – FASB proposes simplifying an issuer’s accounting for debt and equity instruments
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