Equity-linked securities have proliferated to a point where questions around accounting for them are more the norm than the exception. To address the latest emerging issues, PwC has published a 24-page instruction manual of sorts to walk through the trickiest parts of the accounting analysis.
Companies often enter equity-linked financing transactions to raise money at a reduced cost, with the tie to equity lowering the cash interest cost. Examples of such transactions include debt instruments with detachable warrants for preferred or common equity instruments, conventional or non-conventional convertible debt, convertible preferred stock, and many others. The complexity inherent to such transactions demands a detailed analysis to understand the terms of each instrument issued, the underwriting agreement, and any related derivatives, PwC says.
