United States

FASB Proposal Addresses Down Round Features and Indefinitely Deferred Pending Content Related to Distinguishing Liabilities from Equity

Dec 12, 2016
From the Financial Reporting View

The FASB recently issued proposed ASU, Part I. Accounting for Certain Financial Instruments with Down Round Features and Part II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic Entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception. Part I would prohibit an entity from considering a down round feature when it assesses whether certain financial instruments are indexed to the entity’s own stock. The entity would, however, recognize the effect of the down round feature when it is triggered. Part II of the proposed ASU recharacterizes as a scope exception the indefinite deferral of certain provisions of FASB ASC Subtopic 480-10, Distinguishing Liabilities from Equity—Overall, that are presented as pending content in the FASB Accounting Standards Codification®.

The FASB will determine the effective date of Part I after considering stakeholder feedback. Part II would not require transition guidance because the amendments do not have an accounting effect.

The comment period ends February 6, 2017.

Read Proposed FASB ASU