Home

Entities raising capital must apply the highly complex, rules-based guidance in U.S. GAAP to determine whether (1) freestanding contracts such as warrants, options, and forwards to sell equity shares are classified as liabilities or equity instruments and (2) convertible instruments contain embedded equity features that require separate accounting as derivative liabilities.

This Roadmap provides an overview of the guidance in ASC 480-10 as well as insights into and interpretations of how to apply it in practice. ASC 480-10 requires (1) issuers to classify certain types of shares of stock and certain share-settled contracts as liabilities or, in some circumstances, as assets and (2) SEC registrants to classify certain types of redeemable equity instruments as temporary equity. The 2023 edition of the Roadmap includes updated and expanded guidance on distinguishing between put warrants and net-cash-settled written call options, the application of the deemed liquidation exception in ASC 480-10-S99-3A, determining whether remeasurement is required when the holders of a convertible instrument control the issuer, and other topics.

This Roadmap provides an overview of the guidance in ASC 815-40 as well as insights into and interpretations of how to apply it in practice. For ease of reference, we have accompanied our discussion with the related authoritative text. The 2023 edition contains new and expanded guidance on topics such as earn-out arrangements, cash settlement provisions, and the initial and subsequent accounting for equity-linked instruments (including standby equity purchase agreements). Further, it is assumed in this edition that an entity has adopted ASU 2021-04.

The 2023 inaugural edition of Deloitte’s Technology Industry Accounting Guide addresses topics of relevance to finance and accounting professionals in the technology industry, such as revenue recognition, software-related costs, acquisitions and divestitures, consolidation, stock-based compensation, leases, financial instruments, income taxes, digital assets, initial public offerings, and disclosures of non-GAAP measures and metrics.