Mar 22, 2016
From the Financial Reporting Network
The FASB recently issued ASU No. 2016-06, Contingent Put and Call Options in Debt Instruments (a consensus of the FASB Emerging Issues Task Force), which clarifies that determining whether the economic characteristics of a put or call are clearly and closely related to its debt host requires only an assessment of the four-step decision sequence outlined in FASB ASC paragraph 815-15-25-24. Additionally, entities are not required to separately assess whether the contingency itself is clearly and closely related.
The ASU is effective for public business entities in interim and annual periods in fiscal years beginning after December 15, 2016. For all other entities, the ASU is effective for fiscal years beginning after December 15, 2017, and interim periods in fiscal years beginning after December 15, 2018. The ASU requires a modified retrospective transition approach, with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. For instruments that are eligible for the fair value option, an entity has a one-time option to irrevocably elect to measure the debt instrument affected by the ASU in its entirety at fair value with changes in fair value recognized in earnings.
The ASU permits early adoption in any interim period for which the entity’s financial statements have not been issued, but would be retroactively applied to the beginning of the year that includes the interim period.