# ASC 470-20-40: Debt — Debt with Conversion and Other Options — 40 Derecognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/470/20/#40-derecognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:212e2be433a17502c1d996079e1ae9457bf719f140b33d2a950941ff8bd328b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 470-20-40: 40 Derecognition [Read section](https://asc.understandingaccounting.org/asc/470/20/#40-derecognition) SEC content: no ##### [470-20-40-1](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:bd4d710e66e0637d5d14a92e5f12d345910b9df169110c1c248b9a64575d70ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-2](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:8f98dbd624999cb9f51a80926a4cbdc53a335280783a1a2b92c8ec9bb1ce03c1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-3](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:141d861c1c08ad3f332a5141917338ca13e72d10d7acbe1c3866089c12786f8e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). #### Contractual Conversion ##### [470-20-40-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:e42795ce4d2129be67ab357a1836bc37120a1d662647510456170f004a8b5004 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a convertible debt instrument accounted for in its entirety as a liability under paragraph [470-20-25-12](https://asc.understandingaccounting.org/asc/470/20/#470-20-25-12) is converted into shares, cash (or other assets), or any combination of shares and cash (or other assets), in accordance with the conversion privileges provided in the terms of the instrument, upon conversion the carrying amount of the convertible debt instrument, including any unamortized premium, discount, or issuance costs, shall be reduced by, if any, the cash (or other assets) transferred and then shall be recognized in the capital accounts to reflect the shares issued and no gain or loss is recognized. ##### [470-20-40-4A](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-4A) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:57d58e803a0ec7ba774b915fcb3041f5c808265ab6de1c102f50f3527250322f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). #### Conversion upon Issuer's Exercise of Call Option ##### [470-20-40-5](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:1c88721ac927c22cf75d85e78babee9a09f5d097a89e838f1a9ef083f9cf7929 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following guidance addresses accounting for the issuance of equity securities to settle a debt instrument (pursuant to the instrument's original conversion terms) that became convertible upon the issuer's exercise of a call option: 1. a [Substantive conversion feature](https://asc.understandingaccounting.org/glossary/s/#substantive-conversion-feature "A conversion feature that is at least reasonably possible of being exercisable in the future absent the issuer's exercise of a call option."). If the debt instrument contained a substantive conversion feature as of [time of issuance](https://asc.understandingaccounting.org/glossary/t/#time-of-issuance "The date when agreement as to terms has been reached and announced, even though the agreement is subject to certain further actions, such as directors' or stockholders' approval."), the issuance of equity securities shall be accounted for as a contractual conversion. That is, no gain or loss shall be recognized related to the equity securities issued to settle the instrument. 2. b No substantive conversion feature. If the debt instrument did not contain a substantive conversion feature as of time of issuance, the issuance of equity securities shall be accounted for as a debt extinguishment. That is, the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.") of the equity securities issued should be considered a component of the reacquisition price of the debt. ##### [470-20-40-6](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:57158180c88bc6d673173683f2001fab09af257114d0388f2591be63db44c760 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The assessment of whether the conversion feature is substantive may be performed after time of issuance but shall be based only on assumptions, considerations, and marketplace information available as of time of issuance. ##### [470-20-40-7](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:a6018aeff1fd9b12b0d73714c9449c80cea7bb7eaaa5ef1ebac380c32e5272d1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. By definition, a substantive conversion feature is at least [reasonably possible](https://asc.understandingaccounting.org/glossary/r/#reasonably-possible "The chance of the future event or events occurring is more than remote but less than likely.") of being exercised in the future. If the conversion price of an instrument at issuance is extremely high so that conversion of the instrument is not deemed at least reasonably possible as of time of issuance, then the conversion feature would not be considered substantive. ##### [470-20-40-8](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:05a63c87337a6990eb80bd9988f96321dbe85ca54af85c22a994e1aadfb4fe77 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of determining whether a conversion feature is reasonably possible of being exercised, the assessment of the holder's intent is not necessary. Therefore, even if such an instrument included a conversion feature that provided for conversion due solely to the passage of time (for example, the instrument will become convertible at a date before its maturity date), it would be inappropriate to conclude that the conversion feature is substantive. Also, an instrument that became convertible only upon the issuer's exercise of its call option does not possess a substantive conversion feature. ##### [470-20-40-9](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:cbcb7940fdcf07cc0b945940b81822e3cf33933805cf21aec03b370236d6d6f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Methods that may be helpful in assessing whether a conversion feature is substantive include the following: 1. a The fair value of the conversion feature relative to the fair value of the debt instrument. Comparing the fair value of a conversion feature to the fair value of the debt instrument (that is, the complete instrument as issued) may provide evidence that the conversion feature is substantive. 2. b The effective annual interest rate per the terms of the debt instrument relative to the estimated effective annual rate of a nonconvertible debt instrument with an equivalent expected term and credit risk. Comparing the effective annual interest rate of the debt instrument to the effective annual rate the issuer estimates it could obtain on a similar nonconvertible instrument may provide evidence that a conversion feature is substantive. 3. c The fair value of the debt instrument relative to an instrument that is identical except for which the conversion option is not contingent. Comparing the fair value of the debt instrument to the fair value of an identical instrument for which conversion is not contingent isolates the effect of the contingencies and may provide evidence about the substance of a conversion feature. If the fair value of the debt instrument is similar to the fair value of an identical convertible debt instrument for which conversion is not contingent, then it may indicate that the conversion feature is substantive. However, this approach may not be appropriate unless it is clear that the conversion feature, not considering the contingencies, is substantive. 4. d Qualitative evaluation of the conversion provisions. The nature of the conditions under which the instrument may become convertible may provide evidence that the conversion feature is substantive. For example, if an instrument may become convertible upon the occurrence of a specified contingent event, the likelihood that the contingent event will occur before the instrument's maturity date may indicate that the conversion feature is substantive. However, this approach may not be appropriate unless it is clear that the conversion feature, not considering the contingencies, is substantive. ##### [470-20-40-10](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:8233c6420a03049bd9654ab4a78aee44874d40a93ece2eed9812446df837fd35 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraphs [470-20-40-7 through 40-9](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-7) does not address the treatment of an instrument for purposes of applying Subtopic 260-10. #### Interest Forfeiture ##### [470-20-40-11](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-11) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:7dae1c8f9e47f6f3c790f20b19145d563cb541c256a35b9d554d590e3ef63710 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the terms of conversion of a convertible debt instrument provide that any accrued but unpaid interest at the date of conversion is forfeited by the former debt holder, accrued interest from the last interest payment date, if applicable, to the date of conversion, net of related income tax effects, if any, shall be charged to interest expense and credited to capital as part of the cost of securities issued. Thus, the accrued interest is accounted for in the same way as the principal amount of the debt converted and any unamortized premium, discount, or issuance costs; the net carrying amount of the debt, including any unamortized premium, discount, or issuance costs and the related accrual for interest to the date of conversion, net of any related income tax effects, is a credit to the entity's capital. ##### [470-20-40-12](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-12) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:00dc21196b9c75a25925a28cf6496dadd09016ab315e039901e83617fe1bff73 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). #### Induced Conversions ##### [470-20-40-13](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:218f66d447af1f9d17e12b0317d5889fc1ccdf2fe3710443fe4fe852c4692b72 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in paragraph [470-20-40-16](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-16) applies to conversions of convertible debt to equity securities pursuant to terms that reflect changes made by the debtor to the conversion privileges provided in the terms of the debt at issuance (including changes that involve the payment of consideration) for the purpose of inducing conversion. That guidance applies only to conversions that both: 1. a Occur pursuant to changed conversion privileges that are exercisable only for a limited period of time (inducements offered without a restrictive time limit on their exercisability are not, by their structure, changes made to induce prompt conversion) 2. b Include the issuance of all of the equity securities issuable pursuant to conversion privileges included in the terms of the debt at issuance for each debt instrument that is converted, regardless of the party that initiates the offer or whether the offer relates to all debt holders. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)The guidance in paragraph [470-20-40-16](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-16) applies to conversions of convertible debt instruments pursuant to terms that reflect changes made by the issuer to the conversion privileges provided in the terms of the existing debt instrument (including changes that involve the payment of consideration) for the purpose of inducing conversion. That guidance applies only to conversions for which all of the following criteria are satisfied: 1. a The conversion occurs pursuant to changed conversion privileges that are exercisable only for a limited period of time (inducements offered without a restrictive time limit on their exercisability are not, by their structure, changes made to induce prompt conversion). 2. b The conversion includes the issuance of all of the consideration (in form and amount) issuable pursuant to conversion privileges provided in the terms of the existing debt instrument for each debt instrument that is converted, regardless of the party that initiates the offer or whether the offer relates to all debt holders. See paragraph [470-20-40-13A](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13A) for additional guidance applicable to debt instruments whose conversion privileges permit the entity to issue cash (or other assets) or a combination of shares and cash (or other assets) upon conversion. The examples in paragraphs [470-20-55-9A through 55-9J](https://asc.understandingaccounting.org/asc/470/20/#470-20-55-9A) illustrate the application of this guidance. 3. c The existing debt instrument, regardless of whether it is currently convertible, contained a substantive conversion feature as of both the time of issuance and the date the inducement offer is accepted by the convertible debt holder. See paragraphs [470-20-40-6 through 40-10](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-6) for additional guidance on determining whether a conversion feature is substantive. ##### [470-20-40-13A](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13A) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:dc43bb359cbe620a92f3c1c55fdf462bc924ab75416b8eec33de2f66084bd948 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)In applying the guidance in paragraph [470-20-40-13(b)](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13), an entity shall compare the amount of cash (or other assets) and number of shares issuable under the conversion privileges provided in the terms of the existing instrument with the amount of cash (or other assets) and number of shares issuable under the inducement offer. An entity shall consider the following: 1. a For purposes of comparing the amount of cash (or other assets) and number of shares issuable, if the settlement terms under either the existing conversion privileges or the inducement offer are based on a future share price or average of future share prices (such as a volume-weighted average price), then an entity shall use the fair value of the shares as of the date the inducement offer is accepted. For example, the incorporation, elimination, or modification of a volume-weighted average price formula that is based on future share prices does not affect the determination of the amount of cash or number of shares issuable for the induced conversion assessment because the fair value of the shares as of the date the inducement offer is accepted would be used instead of the future volume-weighted average price. A future share price refers to a share price measured after the inducement offer is accepted. 2. b Changes that result in the amount of cash (or other assets) and number of shares being indexed to something other than the future price of the issuer’s shares (for example, the fair value of a commodity) shall be considered a change in the form of settlement. 3. c If within the one-year period preceding the date the inducement offer is accepted by the convertible debt holder the existing debt has been exchanged or modified (without being deemed to be substantially different in accordance with the guidance in Subtopic 470-50), then the conversion privileges provided in the debt terms that existed one year before the date the offer is accepted by the convertible debt holder shall be used in place of the conversion privileges provided in the terms of the existing debt instrument. ##### [470-20-40-14](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-14) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:93ba9c41f31fe4fe211281f3b3e6f6b4c45166be59c8d8708195f087a5980679 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A conversion includes an exchange of a convertible debt instrument for equity securities or a combination of equity securities and other consideration, whether or not the exchange involves legal exercise of the contractual conversion privileges included in terms of the debt. The preceding paragraph also includes conversions pursuant to amended or altered conversion privileges on such instruments, even though they are literally provided in the terms of the debt at issuance. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)A conversion includes an exchange of a convertible debt instrument for equity securities or other consideration, whether or not the exchange involves legal exercise of the contractual conversion privileges included in terms of the debt. The guidance in paragraphs [470-20-40-13 through 40-13A](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13) also applies to conversions pursuant to amended or altered conversion privileges on such instruments, even though the right to amend the terms is provided in the terms of the existing debt instrument. ##### [470-20-40-15](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-15) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:96b8dab0d1f24563bda9d69a9329a6f5214d1e07daee7cdc33275e56c33034b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The changed terms may involve any of the following: 1. a A reduction of the original conversion price thereby resulting in the issuance of additional shares of stock 2. b An issuance of warrants or other securities not provided for in the original conversion terms 3. c A payment of cash or other consideration to those debt holders that convert during the specified time period. The guidance in the following paragraph does not apply to conversions pursuant to other changes in conversion privileges or to changes in terms of convertible debt instruments that are different from those described in this paragraph. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)The changed terms may involve any of the following: 1. a A reduction of the conversion price thereby resulting in the issuance of additional shares of stock 2. b An issuance of warrants or other securities not provided for in the conversion privileges in the terms of the existing instrument 3. c A payment of cash or other consideration to those debt holders that convert during the specified time period. The guidance in paragraph [470-20-40-16](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-16)does not apply to conversions pursuant to other changes in conversion privileges or to changes in terms of convertible debt instruments that are different from those described in this paragraph. ##### [470-20-40-16](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-16) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:dc245149444f67391073ad814f54d4cd558bafb8d6fd3a8272c6847b6098ec09 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If a convertible debt instrument is converted to equity securities of the debtor pursuant to an inducement offer (see paragraph [470-20-40-13](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13)), the debtor shall recognize an expense equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities issuable pursuant to the original conversion terms. The fair value of the securities or other consideration shall be measured as of the date the inducement offer is accepted by the convertible debt holder. That date normally will be the date the debt holder converts the convertible debt into equity securities or enters into a binding agreement to do so. Until the debt holder accepts the offer, no exchange has been made between the debtor and the debt holder. Example 1 (see paragraph [470-20-55-1B](https://asc.understandingaccounting.org/asc/470/20/#470-20-55-1B)) illustrates the application of this guidance. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)If a convertible debt instrument is converted pursuant to an inducement offer (see paragraph [470-20-40-13](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-13)), the issuer shall recognize an expense equal to the fair value of all securities and other consideration transferred in the transaction in excess of the fair value of securities and other consideration issuable pursuant to the conversion privileges provided in the terms of the existing instrument. The fair value of the securities or other consideration shall be measured as of the date the inducement offer is accepted by the convertible debt holder. That date normally will be the date the debt holder converts the convertible debt or enters into a binding agreement to do so. Until the debt holder accepts the offer, no exchange has been made between the issuer and the debt holder. Example 1 (see paragraph [470-20-55-1B](https://asc.understandingaccounting.org/asc/470/20/#470-20-55-1B)) illustrates the application of this guidance. ##### [470-20-40-17](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-17) Pending content: yes Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:d4e3fe632ca5b33c2abd5c96d11997f77d9092fc611c4274c965bdae1f92db30 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the preceding paragraph does not require recognition of gain or loss with respect to the shares issuable pursuant to the original conversion privileges of the convertible debt when additional securities or assets are transferred to a debt holder to induce prompt conversion of the debt to equity securities. In a conversion pursuant to original conversion terms, debt is extinguished in exchange for equity pursuant to a preexisting contract that is already recognized in the financial statements, and no gain or loss is recognized upon conversion. Transition date:(P) December 16, 2025; (N) December 16, 2025Transition guidance: [470-20-65-4](https://asc.understandingaccounting.org/asc/470/20/#470-20-65-4)The guidance in paragraph [470-20-40-16](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-16)does not require recognition of gain or loss with respect to the shares (or other consideration) issuable pursuant to the conversion privileges provided in the terms of the existing convertible debt instrument when additional securities, instruments, or assets are transferred to a debt holder to induce prompt conversion of the existing debt instrument. In a conversion pursuant to the conversion privileges provided in the terms of the existing instrument, debt is settled in exchange for shares, cash (or other assets), or any combination of shares and cash (or other assets) pursuant to a preexisting contract that is already recognized in the financial statements, and no gain or loss is recognized upon conversion. #### Modifications and Extinguishments ##### [470-20-40-18](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-18) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:1de76d5c191c8191c82e519505e22ffbbbd05684fe6871ad518d783ae9e975e0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For additional guidance on modifications (or exchanges) and extinguishments of convertible debt instruments, see Subtopic 470-50. ### Cash Conversion ##### [470-20-40-19](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-19) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:32c4e7e91c8a93b4fcbdf08ab8bd0b486103f478469341db866bc2c69719995b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-20](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-20) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:1674e2d898c8797a80b5df8d306e8fee67222e5f29d0b8965291823bb0e11868 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-21](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-21) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:1add5244951d01c84ab114fb89f37f82c2d7834d490b5f46e0afa0cbc412fd3a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-22](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-22) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:19ff31a734ce3be87a72bc32a4f945593cfee952071275cc955a844672a2e513 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-23](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-23) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:111c11f1bede072c9c4c6bf6173f53af8dd21b56d2f14d5536631e4d4d795955 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-24](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-24) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:a8fda79885a127bf6b407521bbb3221eb8dfe783f6d624812b45b26f3c7b09a3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-25](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-25) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:a2db397777e5084c156e8a2974aedeba41dcdd17e9ec046242c3e9aec4663791 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/). ##### [470-20-40-26](https://asc.understandingaccounting.org/asc/470/20/#470-20-40-26) Pending content: no Source downloaded (UTC): 2026-09-10T00:31:32.200Z to 2026-09-10T00:31:32.200Z Record version: sha256:7be967c4bc2f5cf0e9695912bd1542075171cf86818a7dc718361e53dc37bb5a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2020-06](https://asc.understandingaccounting.org/updates/asu-2020-06/).