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FASB issues ASU on debt instruments with embedded call (put) options

  • FASB document Image

Mar 14, 2016

The FASB has issued Accounting Standards Update (ASU) No. 2016-06, “Contingent Put and Call Options in Debt Instruments.”

The ASU clar­i­fies that in assessing whether an embedded contingent put or call option is clearly and closely related to the debt host, an entity is required to apply only the four-step decision sequence in ASC 815-15-25-42 (as amended by the ASU). The entity does not have to separately assess whether the event that triggers its ability to exercise the contingent option is itself indexed only to interest rates or credit risk.

For public busi­ness en­ti­ties, the amend­ments in the ASU are ef­fec­tive for annual re­port­ing periods, and interim periods therein, be­gin­ning after De­cem­ber 15, 2016. The ef­fec­tive date for all other en­ti­ties is one year later than this (i.e., De­cem­ber 15, 2017). Early adop­tion is per­mit­ted.

For more in­for­ma­tion, see Deloitte's related Heads Up as well as the ASU on the FASB’s Web site.

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