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 Categorized: Indexed to Own Stock
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 »