6.6 Presentation and Disclosure
6.6.1 Presentation on a Classified Balance Sheet
ASC 470-20
45-3 The guidance in the Cash Conversion Subsections does not affect an issuer’s determination of whether
the liability component should be classified as a current liability or a long-term liability. For purposes of applying
other applicable U.S. GAAP to make that determination, all terms of the convertible debt instrument (including
the equity component) shall be considered. Additionally, the balance sheet classification of the liability
component does not affect the measurement of that component under paragraphs 470-20-35-12 through
35-16.
In determining whether the liability component of convertible debt within the scope of the CCF guidance
in ASC 470-20 should be classified as current or long-term on a classified balance sheet, the issuer
considers all the terms of the debt, including the conversion feature. The separation of an equity
component does not affect the issuer’s determination of whether the liability component should be
classified as current or noncurrent.
An issuer applies ASC 210-10-45 and ASC 470-10-45 to determine the appropriate balance sheet
classification of debt. CCFs may cause debt that otherwise would have been classified as noncurrent
to be classified as current. Convertible debt should be treated as debt with a demand provision
under ASC 470-10-45-10 if the CCFs (1) permit the holder to convert at any time or within one year (or
operating cycle, if longer) of the reporting date and (2) require the issuer to settle the accreted value in
cash (i.e., Instrument C as described in Section 6.1.3). Similarly, convertible debt that requires the issuer
to settle the accreted value in cash should be treated as having a demand provision if (1) the conversion
feature is contingent and (2) the contingency is met as of the balance sheet date. The liability component
would be treated as debt that is due on demand even if the conversion option were out-of-the-money.
If convertible debt instruments subject to the CCF guidance allow the issuer to pay the accreted value
in cash or stock or any combination thereof (i.e., Instrument X), the diluted EPS treatment depends
on whether the issuer overcomes the presumption of share settlement of the accreted value. If that
presumption is overcome, the entity calculates the dilutive effect of the convertible debt instrument by
using the treasury stock method (i.e., the entity uses the dilutive EPS guidance applicable to Instrument
C). An entity should determine the current versus noncurrent classification of the liability component
in a manner consistent with its intended settlement for calculating diluted EPS. For example, it would
generally be inappropriate to assume share settlement of the accreted value for balance sheet
classification purposes and cash settlement of the accreted value for diluted EPS calculation purposes.
6.6.2 EPS Requirements
This section provides an overview of the EPS requirements that apply to
convertible debt instruments subject to the CCF guidance in ASC 470-20. For
additional discussion, see Deloitte’s Roadmap Earnings per Share.
6.6.2.1 Basic EPS
Provided that a convertible debt instrument within the scope of the CCF guidance
in ASC 470-20 does not represent a participating security, basic EPS is
affected as a result of (1) a reduction of the numerator (i.e., net income)
due to the recognition of interest expense or an adjustment to the numerator
due to the recognition of a gain or loss upon extinguishment and (2) an
increase in the denominator if the convertible debt instrument has been
settled in exchange for common stock (i.e., an increase in the
weighted-average common shares outstanding calculated from the date the
security is exchanged for common stock). If the cash convertible debt
instrument meets the definition of a participating security, the entity must
apply the two-class method to calculate basic EPS (see Chapter 5 of
Deloitte’s Roadmap Earnings per Share).
Because the initial carrying amount of the liability component is less than its principal amount, a discount arises on issuance and is amortized under the interest method (see Section 6.4.1). This amortization will increase the reported amount of interest expense, thereby reducing the numerator in the calculation of basic EPS.
As discussed in Section 6.5.3.2, modifications or exchanges involving cash convertible debt instruments that do not result in extinguishment accounting may affect both the carrying amount of the liability component and the effective interest rate used to amortize the discount between the carrying amount and principal amount of the liability component. Thus, a modification or exchange could also affect the numerator in the calculation of basic EPS.
Upon any settlement of a cash convertible debt instrument, ASC 470-20-40-20 requires an issuer to allocate the total consideration between the liability and equity components (see Section 6.5.1). Such an allocation will almost always result in the recognition of an extinguishment gain or loss in earnings in connection with the settlement of the liability component. This gain or loss will affect the numerator in the calculation of basic EPS. See Section 6.5.2 for a discussion of the impact of an induced conversion.
Because interest expense and extinguishment gains and losses on cash convertible debt instruments affect net income, no specific adjustments should be made to the numerator in the calculation of basic EPS.
6.6.2.2 Diluted EPS
6.6.2.2.1 Methods Applicable to Cash Convertible Debt Instruments
A conversion of a cash convertible debt instrument in accordance with its original conversion terms may be settled in cash, common stock, or a combination thereof. An entity that has the option of settling all or a portion of a cash convertible debt instrument in cash or common stock must consider the guidance in ASC 260 on contracts that may be settled in stock or cash. As discussed in the guidance below, an entity that may elect to settle a contract in cash or common stock should assume that the contract will be settled in common stock for diluted EPS purposes. That presumption may be overcome on the basis of past experience or a stated policy.
ASC 260-10
Contracts That May Be Settled in Stock or Cash
45-45 If an entity issues a
contract that may be settled in common stock or in
cash at the election of either the entity or the
holder, the determination of whether that contract
shall be reflected in the computation of diluted
EPS shall be made based on the facts available
each period. It shall be presumed that the
contract will be settled in common stock and the
resulting potential common shares included in
diluted EPS (in accordance with the relevant
provisions of this Topic) if the effect is more
dilutive. Share-based payment arrangements that
are payable in common stock or in cash at the
election of either the entity or the grantee shall
be accounted for pursuant to this paragraph and
paragraph 260-10-45-46. An example of such a
contract is a written put option that gives the
holder a choice of settling in common stock or in
cash.
45-46 . . . The presumption that the contract will be settled in common stock may be overcome if past
experience or a stated policy provides a reasonable basis to believe that the contract will be paid partially or
wholly in cash.
55-32 Adjustments shall be made to the numerator for contracts that are classified, in accordance with Section
815-40-25, as equity instruments but for which the entity has a stated policy or for which past experience
provides a reasonable basis to believe that such contracts will be paid partially or wholly in cash (in which case
there will be no potential common shares included in the denominator). That is, a contract that is reported as
an equity instrument for accounting purposes may require an adjustment to the numerator for any changes
in income or loss that would result if the contract had been reported as an asset or liability for accounting
purposes during the period. For purposes of computing diluted EPS, the adjustments to the numerator are
only permitted for instruments for which the effect on net income (the numerator) is different depending on
whether the instrument is accounted for as an equity instrument or as an asset or liability (for example, those
that are within the scope of Subtopics 480-10 and 815-40).
55-36 For contracts in which the counterparty controls the means of settlement, past experience or a stated
policy is not determinative. Accordingly, in those situations, the more dilutive of cash or share settlement shall
be used.
As noted in ASC 260-10-45-46, “[t]he presumption that the contract will be
settled in common stock may be overcome if past experience or a stated
policy provides a reasonable basis to believe that the contract will be
paid partially or wholly in cash.” Section 4.7.2.3 of Deloitte’s
Roadmap Earnings
per Share discusses matters to be considered in
each financial reporting period in the determination of whether the
presumption of share settlement of a cash convertible debt instrument
may be overcome.
The table below summarizes the diluted EPS methods that apply to cash
convertible debt instruments within the scope of the Cash Conversion
subsections of ASC 470-20. In this table, it is assumed that (1) the
cash convertible debt instrument is not a participating security and (2)
if the instrument is only contingently convertible, it must be included
in the calculation of diluted EPS. See Deloitte’s Roadmap Earnings per
Share for a discussion of the application of the
two-class method of calculating diluted EPS (Section 5.5.2) and of contingently
convertible debt instruments (Section 4.4.3).
|
Instrument
|
Diluted EPS Method
|
|---|---|
|
Instrument B
|
Entity Does
Not Overcome Presumption of Share Settlement of
the Entire Obligation
If an entity is unable to
overcome the presumption of share settlement of
the entire obligation, it should apply the if-converted method to
calculate diluted EPS. Under ASC 260-10-45-21,
such a calculation must be based on the conversion
terms that are most advantageous to the holder.
See Section 4.9 of
Deloitte’s Roadmap Earnings per
Share for further discussion of the
year-to-date calculations of diluted EPS.
Entity
Overcomes Presumption of Share Settlement of the
Entire Obligation
If an entity overcomes the
presumption of share settlement of the entire
obligation, it would assume, in calculating
diluted EPS, that the entire obligation will be
settled in cash upon conversion. In such
circumstances, no adjustment should be made to the
denominator in the calculation of diluted EPS.
However, additional consideration is necessary
because the accounting classification of the
contract differs from the assumed method of
settlement for diluted EPS purposes. Specifically,
the entity would have been required to bifurcate
the embedded conversion option if the contract had
required cash settlement upon conversion. As a
result, the entity should reduce the numerator for
any decrease in net income that would have
occurred during the period if the embedded
conversion option had been classified as a
derivative liability. An entity should only
consider the impact of recognizing the embedded
conversion option as a derivative under ASC
815-15. It should not consider the impact on net
income that would have occurred if the entire
convertible debt instrument had been recognized at
fair value through earnings, since any change in
the convertible debt instrument’s fair value
arising from something other than the embedded
conversion option should not affect the
calculation of diluted EPS. The numerator should
not be adjusted for any increase in net income
that would have occurred during the period if the
embedded conversion option had been classified as
an embedded derivative liability. See further
discussion in Section
4.7.3.2.3 of Deloitte’s Roadmap
Earnings per Share.
|
|
Instrument C
|
ASC 260-10-55-84A states that
“[t]he if-converted method should not be used to
determine the earnings-per-share implications of
convertible debt with the characteristics [of
Instrument C].” However, the entity must still
consider whether it can overcome the presumption
of share settlement of the conversion spread.
Entity Does
Not Overcome Presumption of Share Settlement of
the Conversion Spread
If an entity is unable to
overcome the presumption of share settlement of
the conversion spread, in accordance with ASC
260-10-55-84A, (1) the numerator in the
calculation of diluted EPS should not be adjusted
for the cash-settled portion of the instrument and
(2) the conversion spread should be included in
diluted EPS by using the treasury stock method in
the same manner as if the embedded conversion
option was a freestanding written call option on
the entity’s common shares. Under ASC
260-10-45-21, the calculation of diluted EPS must
be based on the conversion terms that are most
advantageous to the holder. See Section
4.9 of Deloitte’s Roadmap Earnings per Share for further
discussion of the year-to-date calculations of
diluted EPS.
Note that ASC 260-10-55-84A
indicates that the number of incremental shares
added to the denominator is calculated on the
basis of the average market price of the common
shares during the financial reporting period. This
guidance is consistent with the application of the
treasury stock method (i.e., the proceeds received
upon exercise of a written option to sell common
shares are used to repurchase such shares on the
basis of the average market price during the
period). The average market price is used in this
example because the conversion price in the
convertible debt instrument is substantively akin
to proceeds. However, the FASB did not intend to
require this approach. Rather, for Instrument C,
since there are no proceeds that the entity
actually receives upon conversion (i.e., the
entity can only potentially issue net common
shares on the basis of the conversion value), in a
manner consistent with the discussion in Section
8.4.2 of Deloitte’s Roadmap Earnings per Share for similar
arrangements, it is acceptable for an entity to
apply the guidance on contingently issuable shares
in ASC 260-10-45-52 and use the market price of
the entity’s common shares at the end of the
reporting period (or over the averaging period
specified in the convertible debt agreement; the
last stock price used in the average would be the
stock price on the last day of the reporting
period). Entities must select an accounting policy
related to determining the number of incremental
shares and must apply that policy consistently to
all similar instruments.
Entity
Overcomes Presumption of Share Settlement of the
Conversion Spread
If an entity overcomes the
presumption of share settlement of the conversion
spread, it would assume, in calculating diluted
EPS, that the entire obligation will be settled in
cash upon conversion. In such circumstances, no
adjustment should be made to the denominator in
the calculation of diluted EPS. However,
additional consideration is necessary because the
accounting classification of the contract differs
from the assumed method of settlement for diluted
EPS purposes. Specifically, the entity would have
been required to bifurcate the embedded conversion
option if the contract had required cash
settlement upon conversion. As a result, the
entity should reduce the numerator for any
decrease in net income that would have occurred
during the period if the embedded conversion
option had been classified as a derivative
liability. An entity should only consider the
impact of recognizing the embedded conversion
option as a derivative under ASC 815-15. It should
not consider the impact on net income that would
have occurred if the entire convertible debt
instrument had been recognized at fair value
through earnings, since any change in the
convertible debt instrument’s fair value arising
from something other than the embedded conversion
option should not affect the calculation of
diluted EPS. The numerator should not be adjusted
for any increase in net income that would have
occurred during the period if the embedded
conversion option had been classified as an
embedded derivative liability. See further
discussion in Section
4.7.3.2.3 of Deloitte’s Roadmap
Earnings per Share.
|
|
Instrument X
|
Entity Does
Not Overcome Presumption of Share Settlement of
Entire Obligation
If an entity does not overcome
the presumption of share settlement of the entire
obligation, it should treat the convertible debt
instrument in the same manner as Instrument B and
apply the if-converted method. Under ASC
260-10-45-21, the calculation of diluted EPS must
be based on the conversion terms that are most
advantageous to the holder. See Section
4.9 of Deloitte’s Roadmap Earnings per Share for further
discussion of the year-to-date calculations of
diluted EPS.
Entity
Overcomes Presumption of Share Settlement of the
Accreted Value
If an entity has a reasonable
basis for concluding that it would settle the
accreted value of the debt obligation in cash
(i.e., on the basis of a “stated policy” or past
practice), it should treat the convertible debt
instrument in the same manner as Instrument C.
Therefore, no adjustment should be made to the
numerator, and the entity should apply the
treasury stock method to calculate the diluted
effect of the conversion spread. Under ASC
260-10-45-21, the calculation of diluted EPS must
be based on the conversion terms that are most
advantageous to the holder. See Section
4.9 of Deloitte’s Roadmap Earnings per Share for further
discussion of the year-to-date calculations of
diluted EPS.
Entity Overcomes Presumption
of Share Settlement of the Entire Obligation
If an entity overcomes the
presumption of share settlement of the entire
obligation, it would assume, in calculating
diluted EPS, that the entire obligation will be
settled in cash upon conversion. Therefore, in
such circumstances, the entity should treat the
convertible debt instrument in the same manner as
it would treat Instruments B and C when cash
settlement of the entire obligation is assumed for
diluted EPS purposes.
|
Connecting the Dots
Although the table above describes how an entity should account for diluted EPS
when it overcomes the presumption of share settlement and
therefore assumes cash settlement of the entire obligation, it
is generally not appropriate to conclude that the entire
instrument will be settled in cash in the calculation of diluted
EPS. As discussed in Section 4.7.2.3 of
Deloitte’s Roadmap Earnings per Share,
it is difficult for an entity to assert that it has the intent
and ability to cash-settle an instrument for which there is no
limit on the amount of cash that would be due upon
settlement.
Entities should disclose their intent and judgment regarding whether cash convertible debt instruments are assumed to be settled in cash or shares when such judgment is material to reported diluted EPS.
6.6.2.3 Out-of-the-Money Conversion Options
A holder of a cash convertible debt instrument could exercise the embedded conversion option when it is out-of-the-money. Depending on the terms of the convertible debt instrument, the monetary value of the consideration paid by the issuing entity to satisfy the conversion may differ depending on the settlement method. The terms of some cash convertible debt instruments specify that if the issuing entity chooses to settle a conversion entirely in cash, it must pay the holder no less than the principal amount that is otherwise due on maturity. However, if the entity chooses to settle the conversion in common shares, it is only obligated to deliver a number of common shares based on the original conversion terms. For example, assume that an entity issues a cash convertible debt instrument with a principal amount of $1,000. The terms specify that if the holder exercises the conversion option and the entity elects to pay the entire obligation in cash, it must pay no less than $1,000. Further, assume that the holder exercises the instrument when the conversion value is $900 on the basis of the fair value of the number of the entity’s common shares that would be delivered on conversion. If the entity chooses to settle the entire obligation in cash, it must pay $1,000. However, if the entity can choose to settle the entire obligation in common shares, which would be the case for Instruments B and X, it must only deliver a number of common shares with a fair value of $900. Thus, the monetary value paid on conversion differs because of the $1,000 “floor” on the cash amount payable on conversion that is included in the settlement terms of the instrument.
Questions have arisen regarding the method an issuing entity should use to calculate diluted EPS when cash convertible debt instruments with the characteristics described above are issued in the form of Instrument X. As discussed in the table above, when an entity does not conclude that it would settle the entire obligation underlying Instrument X in cash, which is typically the case, it must use judgment to determine whether to apply the if-converted method or treasury stock method to calculate diluted EPS. In financial reporting periods in which the conversion option is out-of-the-money, upon any conversion by the holder (which must be assumed for diluted EPS purposes), the entity would be economically motivated to elect to settle the entire obligation in common shares, since the fair value of the common shares issued on conversion would be less than the principal amount otherwise payable in cash. This would suggest that the entity should assume share settlement of the entire obligation and apply the if-converted method to calculate diluted EPS for any financial reporting period for which the conversion option is out-of-the-money. The if-converted method would always be more dilutive than the treasury stock method in such cases, since the treasury stock method never produces a dilutive result when an option is out-of-the-money.
While the if-converted method may be applied in such circumstances, an entity is not required to apply
this method solely because the conversion option is out-of-the-money. Rather, the entity may analyze
Instrument X for diluted EPS purposes at inception (when the conversion option typically is out-of-the-money),
and in each subsequent financial reporting period, on the basis of how it would settle an in-the-money
conversion. Under this approach, if an entity has previously used the treasury stock method
to calculate diluted EPS for Instrument X, the entity is not required to apply the if-converted method
simply because the conversion option becomes out-of-the-money. There are several reasons for this
conclusion. First, the conversion option in Instrument X is generally out-of-the-money in the period of
issuance. ASC 260 does not require an entity to apply the if-converted method to Instrument X in the
financial reporting period in which it was issued. Second, while ASC 260 requires an entity to include
any dilutive effect under the if-converted method of calculation if the conversion option is out-of-the-money,
this requirement is only relevant when an entity applies the if-converted method. ASC 260
does not require an entity to apply the if-converted method solely because a conversion option is
out-of-the-money (and such application is not intuitive since it would be uneconomical for the holder
to convert the instrument). Lastly, when the FASB issued FSP APB 14-1 (codified in ASC 470-20), it was
well acknowledged that entities would be eligible to apply the treasury stock method to cash convertible
instruments issued in the form of Instrument X.
Connecting the Dots
The same issue related to diluted EPS generally does not exist for Instruments
B and C. For Instrument B, an entity must always apply the
if-converted method if it does not overcome the presumption of share
settlement of the entire obligation. As discussed in Section
4.7.2.3 of Deloitte’s Roadmap Earnings per
Share, since it is difficult for an entity to
assert its intent and ability to cash-settle the entire obligation,
an entity that has issued Instrument B will generally always apply
the if-converted method. For Instrument C, an entity must only
determine whether to apply the treasury stock method or the diluted
EPS accounting approach for contracts that are classified as equity
instruments but assumed to be cash-settled for diluted EPS purposes.
Each approach only reflects the dilutive effect of the conversion
value. If the conversion value is out-of-the-money, the conversion
will involve only a settlement of the accreted value for cash and
the entity will not be required to make any adjustment in the
calculation of diluted EPS. There is no incremental impact on the
calculation of diluted EPS because there is no conversion value to
reflect under the treasury stock method when the conversion option
is out-of-the-money.
6.6.2.4 Consideration of Extinguishment Gains and Losses
The derecognition model in ASC 470-20 typically results in the recognition of an extinguishment gain
or loss in earnings in the financial reporting period in which a cash convertible debt instrument is
converted in accordance with its original conversion terms. In such circumstances, questions have arisen
about whether (1) a hypothetical gain or loss should be included as an adjustment to the numerator
when the if-converted method or treasury stock method is applied to a cash convertible debt instrument
and (2) a recognized extinguishment gain or loss should be reversed from the numerator when the
if-converted or treasury stock method is applied to a cash convertible debt instrument that was settled
during a financial reporting period.
When applying the if-converted method to Instrument B or X to calculate diluted
EPS, an entity (1) should not adjust the numerator
for any extinguishment gain or loss that would have been recognized if an
outstanding Instrument B or X had been converted at the beginning of the
reporting period (or the date of issuance, if later) and (2) should reverse from the numerator any gain or loss
that was recognized for an Instrument B or X that was extinguished during
the financial reporting period. See further discussion in Section 4.4.2.2.4 of
Deloitte’s Roadmap Earnings per Share.
When applying the treasury stock method to Instrument C in calculating diluted EPS, an entity should only adjust the denominator, if the effect is dilutive. Such application is consistent with ASC 260-10- 55-84A, which states that “[t]here would be no adjustment to the numerator in the diluted earnings-per-share computation for the cash-settled portion of the instrument because that portion will always be settled in cash.” In essence, Instrument C is treated as comprising both a debt instrument and a written option to sell common stock for diluted EPS purposes; accordingly, the entity may only adjust the denominator in calculating diluted EPS. Therefore, in such circumstances, the entity (1) should not adjust the numerator for any Instrument C outstanding at the end of the period for any extinguishment gain or loss that would have been recognized if conversion had occurred at the beginning of the reporting period (or the date of issuance, if later) and (2) should not reverse from the numerator any gain or loss that was recognized for any Instrument C that was extinguished during the financial reporting period.
6.6.3 Disclosure
ASC 470-20
Disclosure Objectives
10-2 The disclosure requirements of the Cash Conversion Subsections are intended to provide users of financial statements with both:
- Information about the terms of convertible debt instruments within the scope of those Subsections
- An understanding of how those instruments have been reflected in the issuer’s statement of financial position and statement of financial performance.
50-3 An entity shall provide the incremental disclosures required by the guidance in this Section in annual financial statements for convertible debt instruments within the scope of the Cash Conversion Subsections that were outstanding during any of the periods presented.
50-4 As of each date for which a statement of financial position is presented, an entity shall disclose all of the following:
- The carrying amount of the equity component
- For the liability component:
- The principal amount
- The unamortized discount
- The net carrying amount.
50-5 As of the date of the most recent statement of financial position that is presented, an entity shall disclose
all of the following:
- The remaining period over which any discount on the liability component will be amortized
- The conversion price and the number of shares on which the aggregate consideration to be delivered upon conversion is determined
- For a public entity only, the amount by which the instrument’s if-converted value exceeds its principal amount, regardless of whether the instrument is currently convertible
- All of the following information about derivative transactions entered into in connection with the issuance of instruments within the scope of the Cash Conversion Subsections regardless of whether such derivative transactions are accounted for as assets, liabilities, or equity instruments:
- The terms of those derivative transactions
- How those derivative transactions relate to the instruments within the scope of the Cash Conversion Subsections
- The number of shares underlying the derivative transactions
- The reasons for entering into those derivative transactions.
An example of a derivative transaction entered into in connection with the issuance of an instrument within
the scope of the Cash Conversion Subsections is the purchase of call options that are expected to substantially
offset changes in the fair value of the conversion option.
50-6 For each period for which a statement of financial performance is presented, an entity shall disclose both
of the following:
- The effective interest rate on the liability component for the period
- The amount of interest cost recognized for the period relating to both the contractual interest coupon and amortization of the discount on the liability component.
ASC 470-20 includes incremental disclosure requirements for convertible debt instruments that are
within the scope of its CCF guidance and were outstanding during any of the periods presented. The
objective of these disclosure requirements is to inform financial statement users about (1) the terms of
convertible debt instruments within the scope of the CCF guidance and (2) how those instruments have
been reflected in the issuer’s statements of financial position and financial performance.
Below is a tabular overview of the incremental disclosure requirements
applicable to instruments within the scope of the CCF guidance in ASC
470-20.
|
|
Liability Component
|
Equity Component
|
Derivatives Executed at Inception
|
|---|---|---|---|
|
Each balance sheet
|
|
|
|
|
Most recent balance sheet
|
|
|
|
|
Each income statement period
|
|
|
|
For a discussion of disclosure requirements that apply broadly to convertible instruments, including instruments within the scope of the CCF guidance, see Section 4.6.4.
The guidance in GAAP does not address whether the disclosure requirements
related to fair value in ASC 825-10-50 apply to convertible debt instruments
within the scope of the CCF guidance in ASC 470-20 as a whole or only to the
liability component of such instruments. However, there are two acceptable
views:
-
The disclosure requirements in ASC 825-10-50 should be applied to the convertible debt instrument as a whole. Supporters of this view note that the disclosures in ASC 825-10-50 apply to liability-classified financial instruments and there is no specific scope exception in ASC 825-10-50 for the equity-classified component of an instrument.
-
The disclosure requirements in ASC 825-10-50 should be applied only to the liability component. Proponents of this view note that these requirements are not applicable to equity-classified instruments under ASC 825-10-50-8(i), and they apply this scope exception to the equity component of instruments that have been separated into liability and equity components.