FASB proposes clarifying forwards and options accounting

FASB proposed an accounting standard Monday that would clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified forwards and options.

The proposal would affect forwards and options (such as warrants) that remain equity classified after modification.

Based on a consensus of FASB’s Emerging Issues Task Force, the proposal would provide guidance on how an issuer would measure and recognize the effect of these transactions. The proposal would provide a principles-based framework to determine whether an issuer would recognize the modification or exchange as an adjustment to equity or as an expense.

Comments can be submitted through Dec. 28 at FASB’s website.

— Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is the JofA’s editorial director.