Fixed-for-Fixed Option

Posted by & filed under Equity-Linked Transactions, Indexed to Own Stock.

A fixed-for-fixed option is an option contract the gives the holder the right to acquire a fixed number of a company’s equity shares for a fixed per-share price. The number of shares issuable and the per-share price remain fixed throughout the the life of the contract.

Down Round Feature

Posted by & filed under Derivatives, Equity-Linked Transactions, Indexed to Own Stock.

A down round feature in a financial instrument (or component of an embedded feature) reduces the strike price the financial instrument after its issuance if the seller issues shares of its stock at a price lower than the strike price of the financial instrument or issues issues an equity-linked financial instrument having a lower strike… Read more »

Calculating the Constant Yield Using Excel

Posted by & filed under Debt, Derivatives.

I’ve had numerous requests to show how the constant yield rate for debt cost amortization is computed in the sample Excel effective interest method calculations. The idea is pretty simple once you have the formulas set up. The objective is to determine the rate that drives the amortization balance to zero on the maturity date… Read more »

The Effective Interest Rate Method

Posted by & filed under Debt, Equity-Linked Transactions.

The effective interest rate method, or interest method as it is referred to by the FASB in the codification, spreads the total cost of debt over the life of the debt at a constant interest rate. This constant interest rate is also referred to as the constant interest yield. The constant interest rate includes the… Read more »

Materiality and the VIE Consolidation Model

Posted by & filed under Variable Interest Entity.

It’s nice when I can reuse some language from a previous post on a different topic. Today, the topic is materiality in the context of the variable interest entity (VIE) consolidation model. Here’s the recycled language from my post on derivatives and materiality:  “When I think about materiality I do so from both a qualitative… Read more »