Handbook: Debt and equity financing

The array of accounting literature on financial instruments can be bewildering, and the varieties and complexities of modern financial instruments are sometimes staggering. Taken together, it’s not an exaggeration to say that accounting for debt and equity financing transactions can seem daunting.

To simplify some of these complexities, the FASB issued ASU 2020-06 in August 2020, which made the most substantial changes to accounting for convertible financial instruments and contracts in an entity’s own equity in many years. This was followed in May 2021 by guidance in ASU 2021-04 on certain modifications or exchanges of freestanding equity-classified written call options.

Determining the right accounting can require you to maneuver through multiple standards and models just to arrive at the starting point.

This Handbook uses roadmaps to navigate the different standards, explaining what guidance applies to what types of instruments. It provides an in-depth look at the broad and often complex issues related to the classification, measurement, presentation and disclosure of financing instruments. And it includes examples demonstrating how to apply the standards to some common financing transactions.

We hope you find this Handbook useful in understanding how the guidance fits together and applies to financial instruments – from the simple to the most complex.