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Chapter 2 — Scope

2.5 Convertible Preferred Shares With CCFs (Before the Adoption of ASU 2020-06)

2.5 Convertible Preferred Shares With CCFs (Before the Adoption of ASU 2020-06)

ASC 470-20
15-4 The guidance in this Section shall be considered after consideration of the guidance in Subtopic 815-15 on bifurcation of embedded derivatives, as applicable (see paragraph 815-15-55-76A). The guidance in the Cash Conversion Subsections applies only to convertible debt instruments that, by their stated terms, may be settled in cash (or other assets) upon conversion, including partial cash settlement, unless the embedded conversion option is required to be separately accounted for as a derivative instrument under Subtopic 815-15. The guidance in the Cash Conversion Subsections does not affect an issuer’s determination under Subtopic 815-15 of whether an embedded feature shall be separately accounted for as a derivative instrument.
Pending Content (Transition Guidance: ASC 815-40-65-1)
15-4 Paragraph superseded by Accounting Standards Update No. 2020-06.
15-6 For purposes of determining whether an instrument is within the scope of the Cash Conversion Subsections, a convertible preferred share shall be considered a convertible debt instrument if it has both of the following characteristics:
  1. It is a mandatorily redeemable financial instrument.
  2. It is classified as a liability under Subtopic 480-10.
For related implementation guidance, see paragraph 470-20-55-70.
Pending Content (Transition Guidance: ASC 815-40-65-1)
15-6 Paragraph superseded by Accounting Standards Update No. 2020-06.
55-70 An example of a convertible preferred share that paragraph 470-20-15-6 requires an entity consider as a convertible debt instrument for purposes of the scope application of the Cash Conversion Subsections is a convertible preferred share that has a stated redemption date and also would require the issuer to settle the face amount of the instrument in cash upon exercise of the conversion option. Such a convertible preferred share is a mandatorily redeemable financial instrument and is classified as a liability under Subtopic 480-10 because it embodies an unconditional obligation to redeem the instrument by transferring assets at a specified or determinable date (or dates).
Pending Content (Transition Guidance: ASC 815-40-65-1)
55-70 Paragraph superseded by Accounting Standards Update No. 2020-06.