# ASC 815-15-35: Derivatives and Hedging — Embedded Derivatives — 35 Subsequent Measurement Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/815/15/#35-subsequent-measurement) 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): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:eb28e04c0631104a52cae0819225aefdac81c3c17647ce39bfd84afbc204b0e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 815-15-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/815/15/#35-subsequent-measurement) SEC content: no #### Hybrid Instruments That Are Not Separated ##### [815-15-35-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:68dcaca915ef06e8e81ae009c163c7406b8d95b357fe0119cb693c73f0df3fa7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity irrevocably elected to initially and subsequently measure a hybrid financial instrument in its entirety at [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."), changes in fair value for that hybrid financial instrument shall be recognized in earnings. Paragraph [815-20-25-71(a)(3)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-71) states that the entire contract shall not be designated as a hedging instrument pursuant to Subtopic 815-20. ##### [815-15-35-2](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:1a6980c22522b3331db5491dd4de921ba37e96b61978bae5f9c29288d8d8a8b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity cannot reliably identify and measure the [embedded derivative](https://asc.understandingaccounting.org/glossary/e/#embedded-derivative "Implicit or explicit terms that affect some or all of the cash flows or the value of other exchanges required by a contract in a manner similar to a derivative instrument.") that paragraph [815-15-25-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-1) requires be separated from the host contract, the entire contract shall be measured subsequently at fair value with gain or loss recognized in earnings. Paragraph [815-20-25-71(a)(4)](https://asc.understandingaccounting.org/asc/815/20/#815-20-25-71) states that the entire contract shall not be designated as a hedging instrument pursuant to Subtopic 815-20. #### Hybrid Instruments That Are Separated ##### [815-15-35-2A](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-2A) Pending content: no Source downloaded (UTC): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:3d1885f4f98514edc500afdc144521a9ee62f167b76ac7cd2a6fb8861bafb952 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [815-15-25-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-1) requires that an embedded derivative be separated from the host contract and accounted for as a derivative instrument pursuant to Subtopic 815-10 if and only if all of the criteria in paragraph [815-15-25-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-1) are met. ##### [815-15-35-3](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:7e87d01812b8a9eaa8c5f557da83d9b9327bb9cbfb9b5c5a151fb19400044fa0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the host contract component of a [hybrid instrument](https://asc.understandingaccounting.org/glossary/h/#hybrid-instrument "A contract that embodies both an embedded derivative and a host contract.") is reported at fair value with changes in fair value recognized in earnings or [other comprehensive income](https://asc.understandingaccounting.org/glossary/o/#other-comprehensive-income "Revenues, expenses, gains, and losses that under generally accepted accounting principles (GAAP) are included in comprehensive income but excluded from net income."), then the sum of the fair values of the host contract component and the embedded derivative shall not exceed the overall fair value of the hybrid instrument. #### Embedded Conversion Option That No Longer Meets Bifurcation Criteria ##### [815-15-35-4](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:36:12.754Z to 2026-09-10T01:36:12.754Z Record version: sha256:86cd8f1828ff3c8165c617f0b23c741906973c5cc929eceab2f668217762d1f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an embedded conversion option in a convertible debt instrument no longer meets the bifurcation criteria in this Subtopic, an issuer shall account for the previously bifurcated conversion option by reclassifying the carrying amount of the liability for the conversion option (that is, its fair value on the date of reclassification) to shareholders' equity. Any debt discount recognized when the conversion option was bifurcated from the convertible debt instrument shall continue to be amortized.