Complex Securities


Complex Securities

Valuation of Complex Securities (ASC 815)

Convertible Instruments & Embedded Derivatives

Convertible debt valuations are complex in nature. Value of debt can be viewed as a summation of its debt-like obligation to pay a fixed amount at conversion and embedded derivatives. At inception, the value of the instrument can be equated to the amount of funds raised, however, the valuation will change over a time as the issuers drifting valuation and financing prospects will influence expected payoff amounts.

Contingent Consideration

The valuation of Contingent Consideration is inherently challenging due to dependence on the occurrence of future events and the often-complex structure of the payoff functions. We take a closer look at a few of the earnout nuances and challenges that are often overlooked, oversimplified, or overcomplicated in the valuation process.

Incremental Borrowing Rate (IBR) Analysis

Purpose of ASC 842 (Leases) is to increase disclosure and visibility into the leasing obligations of both public and private organizations. Where previously most leases were not included on the balance sheet, the ASC 842 standard requires companies to report right-of-use (ROU) assets and liabilities for almost all leases. Determining the IBR involves components that meet the requirements of the guidance, and they need to be diligently documented, derived and explained.

Distinguishing Liability from Equity (ASC 480)

Current Expected Credit Loss Method (ASC 326)

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