hybrid instrument

Broad Transactions1

1. 815-15Embedded Derivatives815 Derivatives and Hedging

   ASC 815-15 governs when a derivative-like feature embedded in a contract that is not itself a derivative in its entirety (a "hybrid instrument") must be separated ("bifurcated") from the host contract and accounted for as a standalone derivative under Subtopic 815-10. Bifurcation is required if and only if all three criteria in 815-15-25-1 are met: the embedded feature's economic characteristics and risks are not clearly and closely related to the host, the hybrid is not already remeasured at fair value through earnings, and a freestanding instrument with the same terms would be a derivative. As an alternative, an entity may irrevocably elect to measure the entire hybrid financial instrument at fair value through earnings (815-15-25-4), and if it cannot reliably identify and measure the embedded derivative it must measure the whole contract at fair value through earnings (815-15-25-53).