The guidance in U.S. GAAP does not clearly address whether conversion or extinguishment accounting applies to a conversion in situations in which the conversion feature has been bifurcated as a derivative instrument under ASC 815-15. Therefore, as discussed in the example below, it may be acceptable to apply either type of accounting. Similarly, since there is no clear guidance in U.S. GAAP on whether inducement accounting applies to such a conversion, it may be acceptable to apply either inducement accounting (because of the lack of an explicit scope exception; see Section 12.3.4) or extinguishment accounting.
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