# ASC 470-20-S99: Debt — Debt with Conversion and Other Options — SEC 99 SEC Materials

Source: FASB Accounting Standards Codification, Basic View

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## ASC 470-20-S99: SEC 99 SEC Materials

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SEC content: yes

#### SEC Staff Guidance

##### [470-20-S99-1](https://asc.understandingaccounting.org/asc/470/20/#470-20-S99-1)

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The following is the text of the SEC Observer Comment: Debt Exchangeable for the Stock of Another Entity.

-   An issue has been discussed involving an enterprise that holds investments in common stock of other enterprises and issues debt securities that permit the holder to acquire a fixed number of shares of such common stock. These types of transactions are commonly affected through the sale of either debt with detachable warrants that can be exchanged for the stock investment or debt without detachable warrants (the debt itself must be exchanged for the stock investment - also referred to as "exchangeable" debt). Those debt issues differ from traditional warrants or convertible instruments because the traditional instruments involve exchanges for the equity securities of the issuer. There have been questions as to whether the exchangeable debt should be treated similar to traditional convertibles as specified in Subtopic 470-20 or whether the transaction requires separate accounting for the exchangeability feature. The SEC staff believes that Subtopic 470-20 does not apply to the accounting for debt that is exchangeable for the stock of another entity and therefore separation of the debt element and exchangeability feature is required