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Chapter 4 — Identification of and Accounting for Embedded Derivatives

4.1 Background

4.1 Background

ASC 815-15
05-1 Contracts that do not in their entirety meet the definition of a derivative instrument (see paragraphs 815-10-15-83 through 15-139), such as bonds, insurance policies, and leases, may contain embedded derivatives. The effect of embedding a derivative instrument in another type of contract (the host contract) is that some or all of the cash flows or other exchanges that otherwise would be required by the host contract, whether unconditional or contingent on the occurrence of a specified event, will be modified based on one or more underlyings.
15-2 The guidance in this Subtopic applies only to contracts that do not meet the definition of a derivative instrument in their entirety.