Accounting for Convertible Debt and Debt Issued with Stock Purchase Warrants
1. Paragraphs 8 and 9 of APB Opinion No. 101 stated that a portion of the proceeds received for convertible debt or debt issued with stock purchase warrants is ordinarily attributable to the conversion feature or to the warrants and should therefore be accounted for as paid-in capital. Since the issuance of that Opinion, the Board has observed the experiences of issuers of these securities in applying those paragraphs. In addition, inter-ested parties have expressed their views as to the nature of these securities and the problems of implementing the principles dis-cussed in those paragraphs. The observations and views indi-cated that dealing with certain aspects of these securities, par-ticularly convertible debentures, involved difficult problems which warranted further study. In December 1967, the Board, therefore, temporarily suspended the effectiveness of paragraphs 8 and 9 of APB Opinion No. 10 retroactively to their effective date and established specific requirements for earnings per share data to be included in income statements. (See paragraphs 11 through 15 of APB Opinion No. 12.)
1 Effective for fiscal periods beginning after December 31, 1966.
Issued by the Accounting Principles Board of the American Institute of Certified Public Accountants
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OPINIONS OF THE ACCOUNTING PRINCIPLES BOARD