On Monday, May 3, FASB issued a standard designed to clarify an issuer’s accounting for certain modifications or exchanges of freestanding equity-classified written call options that remain equity-classified after modification or exchange. Warrants are one example of the type of call option covered by this guidance.
The ASU provides guidance on how an issuer would measure and recognize the effects of these transactions. The standard provides a principles-based framework to determine whether an issuer should recognize the modification or exchange as an adjustment to equity or an expense.
The new rules take effect for all entities for fiscal years beginning after Dec. 15, 2021, including interim periods within those fiscal years. Read more here.