Debt vs. Equity Classification (Completed)

Many companies raise capital by issuing so-called hybrid instruments. For example, companies may issue convertible preferred shares that pay a fixed dividend, carry voting rights, and are redeemable if certain events occur. Accordingly, these securities contain characteristics of both debt and equity.

The accounting for these types of securities is among the most complicated areas in all of U.S. GAAP. This course will provide a roadmap to help companies and auditors properly account for the issuances of debt and equity securities, including convertible preferred stock and detachable warrants.

Who Should Attend
CPAs in public or private practice and corporate finance staff.

Topics Covered

• Evaluation of warrants and preferred shares under ASC 480, Distinguishing Liabilities From Equity
• Potential accounting outcomes associated with conversion features
• Initial journal entries for recording the issuance of convertible securities and detachable warrants

Learning Objectives

• Recognize how to navigate through U.S. GAAP to apply the appropriate accounting standards to debt and equity issuances
• Determine what types of securities are within the scope of ASC 480
• Identify the possible accounting alternatives for embedded conversion features
• Describe common items that cause warrants to be liability-classified under U.S. GAAP

Level
Overview

Instructional Method
Group: Internet-based

NASBA Field of Study
Accounting (1 hour)

Program Prerequisites
None

Advance Preparation
None