KPMG reports on ASU 2017-11, under which down round features will not cause certain instruments to be accounted for as derivatives.
KPMG reports on ASU 2017-11, under which down round features will not cause certain instruments to be accounted for as derivatives. This means that fewer free-standing equity-linked instruments with down round features will be accounted for as liabilities and fewer features with down round features will be bifurcated from the host contract than under current accounting.
ASU 2017-11
Mandatory effective dates and early adoption provisions:
Effective date | Public business entities | All other entities |
Annual periods – Fiscal years beginning after | December 15, 2018 | December 15, 2019 |
Interim periods – In fiscal years beginning after | December 15, 2018 | December 15, 2020 |
Early adoption allowed? Yes, including interim periods.
A down round feature is a provision in an equity-linked instrument that reduces the strike price of a financial instrument if the entity:
A down round feature exists to protect certain investors from a decline in an entity’s share price. Although a down round feature is not normally a significant driver of the fair value of the instrument, the fair value of that instrument is somewhat greater than a similar equity-linked instrument without a down round feature.
FASB changes accounting and EPS
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