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Appendix A — Embedded Derivative Analysis

A.7 Application of the Double-Double Test in ASC 815

A.7 Application of the Double-Double Test in ASC 815

When evaluating whether an embedded derivative in which the only underlying is an interest rate or interest rate index (i.e., an interest rate-related underlying) is clearly and closely related to its interest-bearing host, an entity must apply the test established by ASC 815-15-25-26(b) (i.e., the double-double test). The double-double test consists of two tests that are performed on the date on which the instrument is acquired (or incurred) by the reporting entity.