New FASB standard addresses induced conversions

FASB published an update Tuesday aimed at improving guidance on the reporting of induced conversions related to settlement of convertible debt instruments.

The Accounting Standards Update (ASU) improves the relevance and consistency of guidance in FASB Subtopic 470-20, Debt—Debt with Conversion and Other Options. The amendments in the ASU are effective for annual reporting periods beginning after Dec. 15, 2025, and interim reporting periods within those annual reporting periods. Early adoption is permitted.

The amendments clarify requirements for determining whether certain settlements of convertible debt instruments, including convertible debt instruments with cash conversion features or convertible debt instruments that are not currently convertible, should be accounted for as an induced conversion.

According to a news release, GAAP provides guidance for determining whether a settlement of convertible instruments at terms different from the original conversion terms should be accounted for as an induced conversion (as opposed to a debt extinguishment). However, the guidance was written in the context of share-settled convertible debt instruments, leaving questions about how to apply the existing induced conversion guidance to settlements of convertible debt instruments with cash conversion and other features.

FASB completes review of revenue recognition standard

A FASB review of a revenue recognition standard issued 10 years ago has concluded the benefits outweigh the costs.

FASB contacted more than 2,200 stakeholders to study the effectiveness of Topic 606, Revenue from Contracts with Customers.

“During the Revenue [post-implementation review] process, we obtained an even greater appreciation for our stakeholders’ commitment to the high-quality implementation of a standard,” FASB chair Richard R. Jones and technical director Jackson M. Day said in a news release. “We were also pleased to learn that most stakeholders agree that, while there are lessons to be learned, overall, the revenue standard’s long-term benefits outweigh the costs of applying it.”

According to the release, FASB plans to use the report and the knowledge gleaned during the review process to “improve the revenue standard and, more broadly, the standard-setting process.”

FASB seeks feedback related to new disaggregation standard

FASB is accepting comments on an ASU that would clarify the interim effective date for recently published ASU No. 2024-03, Income Statement—Reporting Comprehensive Income — Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses.

The interim effective date will apply to public business entities that do not have an annual reporting period that ends on Dec. 31.

Feedback is being accepted through Dec. 10.

— To comment on this article or to suggest an idea for another article, contact Bryan Strickland at Bryan.Strickland@aicpa-cima.com.