The evaluation of whether an instrument is indexed to the entity’s own stock is applicable to contracts and transactions that are linked to or settled in the company’s equity shares. In order for an equity-linked contract to avoid fair value accounting, it must be both indexed to the company’s stock (the subject of this post)… Read more »
Posts By: flysnob
One of the requirements (the second of two requirements to be specific) for a contract or contract provision to be considered indexed to the entity’s own stock is that it equal the difference between the fair value of a fixed number of the entity’s equity shares and either 1) a fixed monetary amount or 2)… Read more »
A fixed-for-fixed forward is a contract for the purchase and sale of a fixed number of a company’s equity shares for a fixed per-share price on a specified date in the future. The number of shares issuable and the per-share price remain fixed throughout the the life of the contract.
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.
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 »
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, 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 »
Here’s a high-level look at the consolidation process under ASC 810, Consolidation. The focus is on the variable interest entity model with an overview of the analysis process as well as more detailed comments on the scope exceptions and characteristics of a VIE.
I’m looking forward to the day when revenue recognition falls under one overarching model. The FASB and the IASB are working on a converged model for customer contracts that will completely revamp the revenue recognition rules and replace much of the guidance currently in place. As of this writing, the effective date for the guidance… Read more »
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 »