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ASC 815 derivatives and financial instruments

ASC 815 derivatives and financial instruments


ASC 815 (formerly FAS 133), Accounting for Derivative Instruments and Hedging Activities, provides guidance on the specific accounting treatment of a multitude of derivative instruments. In the case of equity related instruments, such instruments or embedded features are accounted for at fair value as either an asset or liability, depending on — among other considerations — if the instrument is indexed to the issuer’s own stock. The classification has been the topic of a number of additional FASB pronouncements, such as the Emerging Issue Task Force Statement 07-5: Determining Whether an Instrument (or Embedded Feature) Is Indexed to an Entity’s Own Stock. Common provisions such as anti-dilution clauses in convertible securities or equity warrants may lead to an accounting treatment as a liability with a resulting requirement to value these instruments at fair value in each reporting period.