Читать книгу Wiley GAAP: Financial Statement Disclosure Manual - Joanne M. Flood - Страница 114

Example 7.17: Convertible Notes Payable and Derivative Instruments The Company has adopted the provisions of ASU 2017‐11 to account for the down‐round features of warrants issued with private placements effective as of January 1, 2017. In doing so, warrants with a down‐round feature previously treated as derivative liabilities in the consolidated balance sheet and measured at fair value are henceforth treated as equity, with no adjustment for changes in fair value at each reporting period. The Company accounted for conversion options embedded in convertible notes in accordance with ASC 815. ASC 815 generally requires companies to bifurcate conversion options embedded in convertible notes from their host instruments and to account for them as free‐standing derivative financial instruments. ASC 815 provides for an exception to this rule when convertible notes, as host instruments, are deemed to be conventional, as defined by ASC 815‐40. The Company accounts for convertible notes deemed conventional and conversion options embedded in nonconventional convertible notes which qualify as equity under ASC 815, in accordance with the provisions of ASC 470‐20, which provides guidance on accounting for convertible securities with beneficial conversion features. Accordingly, the Company records, as a discount to convertible notes, the intrinsic value of such conversion options based upon the differences between the fair value of the underlying common stock at the commitment date of the note transaction and the effective conversion price embedded in the note. Debt discounts under these arrangements are amortized over the term of the related debt.