Understanding Complex Financial Instruments

This Practice Aid includes detailed flowcharts for analyzing embedded conversion options, freestanding warrants, and embedded puts and calls. It also discusses other topics such as balance sheet classification of shares, allocation of proceeds and earnings per share among others. It also reflects our perspective on selected practice issues.

The 6th Edition has been updated for recent simplifications under ASU 2020-06, and is applicable for entities that have adopted that standard. For SEC filers, excluding smaller reporting companies, ASU 2020-06 is effective for fiscal years beginning after December 15, 2021. For all other entities, it is effective for fiscal years beginning after December 15, 2023. Early adoption is permitted as of the beginning of the annual fiscal year, but no earlier than fiscal years beginning after December 15, 2020.

Download The 6th Edition

The 5th Edition applies to entities that have not yet adopted ASU 2020-06.

Download The 5th Edition