Debt and equity financing under US GAAP 2021 KPMG Handbook

In August, 2020, the FASB issued ASU 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, resulting in the most substantial changes to this accounting standard in many years. Our in-depth guide has been updated to reflect those changes.

Applicability

  • All entities
  • Entities that issue convertible instruments or contracts in an entity’s own equity.

Relevant dates

Effective immediately

Key impacts

ASU 2020-06 impacts the following areas:

  • Reduces the number of models used to account for convertible instruments.
  • Amends diluted EPS calculations for certain convertible instruments, which will generally result in more dilutive EPS results.
  • Amends the requirements for a conversion option to be classified in equity, which will likely result in more conversion features meeting a scope exception from embedded derivative accounting.

Report contents

  • Identifying relevant accounting guidance for debt and equity instruments
  • Debt
  • Troubled debt restructurings, other debt modifications and extinguishments
  • Equity
  • Distinguishing liabilities from equity
  • SEC guidance on redeemable equity-classified instruments
  • Contracts in an entity’s own equity
  • Hybrid instruments with embedded features
  • Convertible instruments
  • Effective dates and transition of ASU 2020-06

Download from KPMG Financial Reporting View

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