ASU 2016-06 — Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments

Topic 815 requires that embedded derivatives be separated from the host contract and accounted for separately as derivatives if certain criteria are met, including the “clearly and closely related” criterion. The amendments in this Update clarify the requirements for assessing whether contingent call (put) options that can accelerate the payment of principal on debt instruments are clearly and closely related to their debt hosts. An entity performing the assessment under the amendments is required to assess the embedded call (put) options solely in accordance with the four-step decision sequence. The amendments apply to all entities that are issuers of or investors in debt instruments (or hybrid financial instruments that are determined to have a debt host) with embedded call (put) options.

This Accounting Standards Update is the final version of Proposed Accounting Standards Update EITF-15E—Derivatives and Hedging (Topic 815): Contingent Put and Call Options in Debt Instruments, which has been deleted.

For more information, see the following:

Issued: March 14, 2016