Determining proper classification can be complicated for financial instruments that have characteristics of both debt and equity, i.e., convertible debt. In 2020, FASB issued Accounting Standards Update 2020-06, Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity, which made targeted changes to the guidance on convertible instruments and the derivative scope exception for contracts in an entity’s own equity. The standard is already effective for public business entities. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023, including interim periods. Here's a refresher on the new guidance.
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