Insights

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Insights 2020-06-07T22:26:35+00:00

Convertible Debt

07/20/2020|Accounting|

Key question relating to accounting for convertible debt is how to account for the conversion feature embedded in debt sometimes referred to as “debt host”. Under current U.S. GAAP, a debtor first makes a determination if it is eligible and, if so, if it elects to account for debt at fair value. If the fair value option was elected, the debt and the embedded conversion option are reported as one liability instrument, measured at fair value. If the fair value option cannot be or was not elected, the convertible debt may be accounted for under one of the following accounting guidance: Derivative Financial Instruments; Cash Conversion Features (CFF); Beneficial Conversion Feature (BCF); Debt with Significant Premium.

Down Round Protection

07/05/2020|Accounting|

Many companies obtain financing through more than one round of transactions in which they issue equity or equity-linked instruments. Common examples of equity-linked instruments include warrants, convertible debt or convertible preferred stock. Down round protection is a common feature in many instruments that limits the dilution of the economic interest held by the existing investors when the issuer sells new instrument at a price lower than the price of the original instrument.

Changes in Debt Terms

06/19/2020|Accounting|

Under U.S. GAAP, a modification in debt terms is accounted for under one of the three accounting models: 1. Troubled Debt Restructuring (TDR), 2. extinguishment of the existing debt and the issuance of new debt; 3. modification of the existing debt. Management should first determine if the change in debt terms is considered a TDR. If the TDR model does not apply, management needs to determine the change in debt terms should be accounted for as a modification or extinguishment. In such case an entity performs so called 10% cash flow test. Special accounting considerations apply to the change in terms of convertible debt and convertible debt that includes BCF.

SOX Compliance: Easy or Difficult?

01/27/2020|Internal Controls|

It’s not easy but does not have to be difficult if you approach it the right way. Generally, a SOX project involves operational elements (i.e. getting things done) and technical compliance. As compared to financial statements compliance with US GAAP, a SOX project is more operational and less technical. The bulk of SOX work boils down to coordinating the work of accounting, payroll, sales and other departments to ensure all proper control activities are documented, executed, and tested on time.

Project Management: To Team Or Not To Team

08/20/2018|Uncategorized|

I’d like to start with a project management topic that I am excited about. The topic has to do with figuring out what task within a given project should be done individually and which by a team or group of people. Personally, I feel there is no clear enough understanding among managers on this subject.

Leases 101: New Accounting Standard ASC 842 (Part 2)

07/16/2018|Uncategorized|

In prior sessions we saw three examples that helped us identify a lease, which did not look as such on the surface. Now, there is more to lease accounting than what you saw so far. Let's learn more about how entities, especially lessees, have been affected by the new accounting standard.

Leases 101: New Accounting Standard ASC 842

07/09/2018|Accounting, Lease Accounting, Leasing|

At the very basic level, any lease agreement has three components - the asset, the owner, and the end user. Pretty straightforward, right? The reason this concept gets complex is because of a) how “asset” can be defined in the agreement and b) relations between the end user and the asset. We will clarify this with three examples below.

Complex Made Simple: Is It Really Possible?

06/27/2018|Accounting, Client Services, Finance|

The world is becoming complex and so are the financial terms and business concepts. The accounting standards have been improved over the years for better transparency and quality of financial reporting. But, this is increasing complexities in the treatment and representation of various accounting transactions especially the transactions like leasing, stock compensation, revenue recognition, etc.