FASB proposed an Accounting Standards Update (ASU) with the intention to improve guidance for certain financial instruments with characteristics of liabilities and equity, including convertible instruments and contracts in own equity of an entity. The comment period on the proposed ASU ends on October 14, 2019. The proposed ASU would reduce the number of accounting models for convertible debt instruments and convertible preferred stock. It would revise the derivatives scope exception guidance to reduce form-over-substance-based accounting conclusions driven by remote contingent events. The proposed ASU also would improve and amend the related disclosure and earnings-per-share guidance.
FASB, in 2017, took on a project to address complexity associated with applying the generally accepted accounting principles (GAAP) for certain financial instruments with characteristics of liabilities and equity. Stakeholders noted that complexity in this area contributes to a high number of financial statement restatements. Investors and other financial statement users have also cited its complexity when attempting to understand the results of applying the guidance. The amendments in the proposed ASU aim to improve those troublesome areas of the current guidance, specifically the guidance related to both convertible instruments and the derivatives scope exception for contracts in the own equity of an entity.
Comment Due Date: October 14, 2019
Keywords: Americas, US, Banking, Securities, Financial Instruments, Liabilities and Equity, GAAP, Convertible Instruments, Derivatives and Hedging, Derivatives Scope Exception, Accounting Standards Update, IFRS 9, FASB
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