FASB amends convertible debt & contracts in own equity
Defining Issues | August 2020
KPMG reports on amendments to reduce accounting models for convertible instruments and simplify contracts in own equity.
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ASU 2020-06 reduces the number of accounting models for convertible instruments and allows more contracts to qualify for equity classification.
Applicability
ASU 2020-06
- Entities that issue convertible instruments or contracts in an entity’s own equity.
Relevant dates
Key impacts
- Reduces the number of models used to account for convertible instruments
- Amends diluted EPS calculations for convertible instruments
- Amends the requirements for a contract (or embedded derivative) that is potentially settled in an entity’s own shares to be classified in equity
Report contents
- Applicability
- Simplifying the accounting for convertible instruments
- Simplifying the accounting for contracts in an entity’s own equity
- Amendments to diluted EPS guidance
- Effective date and transition
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FASB simplifies accounting for convertible instruments and contracts
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Resource
How convertible debt will be affected by ASU 2020-06
KPMG provides guidance on how ASU 2020-06 will affect convertible debt an issuer can settle in cash and/or shares.