Summary of Statement No. 84

Induced Conversions of Convertible Debt—an amendment of APB Opinion No. 26 (Issued 3/85)

Summary

This Statement amends APB Opinion No. 26, Early Extinguishment of Debt. This Statement specifies the method of accounting for conversions of convertible debt to equity securities when the debtor induces conversion of the debt by offering additional securities or other consideration to convertible debt holders. Such an offer has sometimes been called a convertible debt "sweetener." This Statement requires recognition of an expense equal to the fair value of the additional securities or other consideration issued to induce conversion.

This Statement is effective for conversions of convertible debt pursuant to inducements offered after March 31, 1985, with earlier application encouraged. Retroactive application for transactions occurring during periods for which financial statements have previously been issued is permitted.