Brian Allen Brian Aubuchon Christie Hutchinson Mio Aura
Effectus Group comments on FASB’s Proposed Accounting Standards Update—Exposure Draft, Induced Conversions of Convertible Debt Instruments (EITF Issue No. 23-A)
The comment period for the FASB’s proposed accounting standards update on accounting for induced conversions of convertible debt instruments recently closed. In our comment letter, we share our perspective that we generally support the Board’s efforts to provide further clarity in accounting for induced conversions, including in instances when certain conversion mechanics are eliminated or modified as part of an inducement offer. We expect the proposed amendment to reduce diversity in practice in accounting for transactions where the debtor offers incremental consideration to induce settlement or conversion of convertible debt instruments. However, we encourage the FASB to consider clarifying whether the proposed amendments also apply to conversions of preferred stock and whether the number of accounting models for debt modifications and exchanges could be reduced.
For further perspective on the proposed accounting standard update, please contact Brian Allen at ballen@effectusgroup.com, Brian Aubuchon at baubuchon@effectusgroup.com, Christie Hutchinson at chutchinson@effectusgroup.com or Mio Aura at maura@effectusgroup.com.
