Required subscriptions
- US GAAP
This Roadmap provides an overview of the requirements in ASC 470-20
related to convertible debt before the amendments made by ASU 2020-06. It includes
our insights into and interpretations of how this accounting guidance should be
applied by entities that have not adopted ASU 2020-06. For ease of reference, we
have accompanied our discussion with the related authoritative text and other
relevant literature.
Determining the appropriate accounting for convertible debt
instruments can often be time-consuming and complex and frequently requires the
involvement of technical accounting specialists. To properly apply the numerous
rules and exceptions in U.S. GAAP, an issuer may need to closely analyze an
instrument’s terms and conditions and the related facts and circumstances. The
outcome of this analysis can significantly affect the classification, measurement,
and earnings impact of the convertible instrument and the associated financial
statement ratios.
This Roadmap is intended to help an issuer navigate the guidance, organize its
analysis, and arrive at appropriate accounting conclusions. The 2021 edition
includes updated and expanded guidance as well as On the
Radar, a new section that briefly summarizes emerging issues and
trends related to the accounting and financial reporting topics addressed in the
Roadmap. Note that in August 2020, the FASB issued ASU 2020-06, which significantly
affects the issuer’s accounting for convertible debt instruments. Because this
Roadmap is based on GAAP before the amendments made by ASU 2020-06, it should not be
used by entities that have adopted that ASU. The 2021 edition of Deloitte’s Roadmap
Debt will address an issuer’s accounting for convertible debt after adoption of ASU
2020-06.
This Roadmap is intended to help an issuer navigate the guidance, organize its
analysis, and arrive at appropriate accounting conclusions.