Full Answer
What is the FASB Codification Guide to accounting standards?
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
How is the cost of stock-based compensation recognized in accounting?
As Entity B has recognized the cost associated with the stock-based compensation incurred on its behalf, the portion of the cost recognized by Entity A as an increase to its investment in Entity B (40 percent) is expensed in the appropriate period when Entity A recognizes its share of the earnings of Entity B.
What are the subtopics of the compensation—stock compensation topic?
718-10-05-1 The Compensation—Stock Compensation Topic provides guidance on share-based payment transactionswith employees. This Topic includes the following Subtopics: a. Overall b. Awards Classified as Equity c. Awards Classified as Liabilities d.
What is topic 718 of the FASB?
Compensation—Stock Compensation (Topic 718) No. 2018-07 June 2018 Improvements to Nonemployee Share-Based Payment Accounting An Amendment of the FASB Accounting Standards Codification®
What is FASB ASC 718?
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 718, Stock Compensation (formerly, FASB Statement 123R), requires generally that all equity awards granted to employees and nonemployees be accounted for at “fair value.” This fair value is measured at grant for stock-settled ...
What is the major difference between convertible debt and detachable stock warrants?
The major difference between convertible debt and stock warrants is that upon exercise of the warrants: A. the stock is held by the company for a defined period of time before they are issued to the warrant holder.
When accounting for stock warrants issued with other securities How should the warrant and the security be treated in accounting if the warrant is detachable?
When accounting for stock warrants issued with other securities, how should the warrant and the security be treated in accounting if the warrant is detachable? They should be treated as two securities at issuance and one security if the stock warrant is redeemed.
What is a substantive conversion option?
That is, the fair value of the equity securities issued should be considered a component of the reacquisition price of the debt. To be considered substantive, a conversion option should be at least reasonably possible of being exercised in the future. Many conversion options meet that definition and are substantive.
What is the accounting for issued convertible bond?
what is the accounting for issued convertible bond? Bondholders exchange their convertible bonds for ordinary shares. The carrying amount of these bonds was lower than market value but greater than the par value of the ordinary shares issued.
What is the difference between a convertible note and a warrant?
Convertible bonds carry the option of conversion into common stock at a specified price during a particular period. Stock purchase warrants are given with bonds or preferred stock as an inducement to the investor, because they permit the purchase of the company's common stock at a stated price at any time.
How should the proceeds from the sale of debt with detachable stock warrants be allocated between the two securities?
The proceeds from the sale of debt with detachable stock warrants should be allocated between the two securities based on the: aggregate fair market value of the bonds and the warrants.
How do I account for a warrant?
The two main rules to account for stock warrants are that the issuer must recognize the fair value of the equity instruments issued or the fair value of the consideration received, whichever can be more reliably measured; and recognize the asset or expense related to the provided goods or services at the same time.
What's the difference between warrants and options?
A stock warrant represents the right to purchase a company's stock at a specific price and at a specific date. A stock warrant is issued directly by a company to an investor. Stock options are purchased when it is believed the price of a stock will go up or down. Stock options are typically traded between investors.
What is an induced conversion?
An induced conversion is a transaction in which a reporting entity offers additional shares or other consideration (“sweeteners”) to investors to incentivize them to convert their convertible instrument.
How many accounting models are related to convertible debt?
five different accounting modelsUnder US GAAP before the adoption of ASU 2020-06, there are five different accounting models for convertible debt instruments that are issued in financing transactions: The SEC staff closely scrutinizes the appropriate accounting for convertible debt instruments.
What is convertible debt financing?
With convertible debt, a business borrows money from a lender where both parties enter the agreement with the intent (from the outset) to repay all (or part) of the loan by converting it into a certain number of its common shares at some point in the future.