Overview
Our publication summarizes the FASB’s final guidance that clarifies the requirements for determining whether to account for certain settlements of convertible debt instruments as induced conversions or extinguishments. The guidance is effective for all entities for fiscal years beginning after 15 December 2025 and interim reporting periods within those fiscal years. Early adoption is permitted for all entities that have adopted Accounting Standards Update (ASU) 2020-06, Debt — Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging — Contracts in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity. Entities can apply the guidance either prospectively, to settlements of convertible debt instruments that occur after the effective date or retrospectively, as of the later of the beginning of the earliest period presented or the date the entity adopted ASU 2020-06.