# ASC 815-15-40: Derivatives and Hedging — Embedded Derivatives — 40 Derecognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/815/15/#40-derecognition)

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## ASC 815-15-40: 40 Derecognition

[Read section](https://asc.understandingaccounting.org/asc/815/15/#40-derecognition)

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#### Embedded Conversion Option that No Longer Meets Bifurcation Criteria

##### [815-15-40-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-40-1)

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If a holder exercises a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to paragraph [815-15-35-4](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-4), the issuer shall recognize any unamortized discount remaining at the date of conversion immediately as interest expense.

##### [815-15-40-2](https://asc.understandingaccounting.org/asc/815/15/#815-15-40-2)

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##### [815-15-40-3](https://asc.understandingaccounting.org/asc/815/15/#815-15-40-3)

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##### [815-15-40-4](https://asc.understandingaccounting.org/asc/815/15/#815-15-40-4)

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If a convertible debt instrument with a conversion option for which the carrying amount has previously been reclassified to shareholders' equity pursuant to the guidance in paragraph [815-15-35-4](https://asc.understandingaccounting.org/asc/815/15/#815-15-35-4) is extinguished for cash (or other assets) before its stated maturity date, the entity shall do both of the following:

1.  a
    
    The portion of the reacquisition price equal to 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 conversion option at the date of the extinguishment shall be allocated to equity.
    
2.  b
    
    The remaining reacquisition price shall be allocated to the extinguishment of the debt to determine the amount of gain or loss.