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As discussed in FSP 12.7, certain convertible debt instruments fall within the scope of the cash conversion guidance in ASC 470-20-15-4 through ASC 470-20-15-5.
ASC 470-20-50-3 through ASC 470-20-50-6 requires the following disclosures to be made as of each balance sheet presented for those instruments:
  • The carrying amount of the equity component
  • The principal amount, the unamortized discount, and the net carrying amount for the liability component
As of the most recent balance sheet date, the reporting entity should disclose the following terms:
  • The remaining period over which any discount on the liability component will be amortized
  • The conversion price and the number of shares issued upon conversion
  • The amount by which the instrument's if-converted value exceeds its principal amount, regardless of whether the instrument is currently convertible (for public entities only)
If any derivatives are executed in connection with these convertible debt instruments, the reporting entity should disclose the following related to the derivatives, regardless of whether the derivatives are accounted for as assets, liabilities, or equity instruments:
  • The derivative transactions' terms
  • How those derivative transactions relate to the instruments
  • The number of shares underlying the derivative transactions
  • The reasons for entering into those derivative transactions
For each period for which an income statement is presented, a reporting entity should disclose both of the following related to the liability component: (1) the effective interest rate and (2) the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the discount.
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