Is it Equity, Debt, or Some of Each?

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Investor financing for today’s tech companies is complex, different terms in convertible debt, warrants, and preferred stock can result in surprising and difficult accounting treatments. At a recent Public Company Accounting Oversight Board (PCAOB) workshop, both SEC and PCAOB representatives emphasized the risk of financial statement misstatements due to complexities in equity vs. liability determination issues. The complexity is due in part to the intricacy of today’s financial instruments, and compounded by U.S. GAAP standards. This subject is addressed in three different Financial Accounting Standard Board (FASB) ASC topics; ASC 480 “Distinguishing Liabilities from Equity”, ASC 470-20 “Debt with Conversion …read more

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