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SUBJECT: ACCOUNTING FOR OWN-SHARE LENDING ARRANGEMENTS IN CONTEMPLATION OF A CONVERTIBLE DEBT OFFERING
PRONOUNCEMENT ANALYZED: Accounting Standards Update (ASU) No. 2009-15
EFFECTIVE DATE: See later discussion
SUMMARY AND HIGHLIGHTS
ACCOUNTING STANDARDS UPDATE NO. 2009-15 AMENDS SUBTOPIC 470-20 TO PROVIDE GUIDANCE ON RECOGNITION, MEASUREMENT, AND DISCLOSURES CONCERNING SO-CALLED OWNSHARE LENDING ARRANGEMENTS ENTERED INTO IN CONTEMPLATION OF A CONVERTIBLE DEBT OFFERING.
INTRODUCTION
Accounting Standards Update (ASU) No. 2009-15, Accounting for Own-Share Lending Arrangements in Contemplation of Convertible Debt Issuance or Other Financing, amends Subtopic 470-20, "Debt with Conversion and Other Options," to give effect to a consensus reached by the FASB's Emerging Issues Task Force (EITF) on Issue 09-1 at its June 2009 meeting (and which was subsequently ratified by the FASB). In Issue 09-1, the EITF addressed the situation in which an entity enters into a so-called share-lending arrangement, which is executed separately but in connection with a convertible debt offering ultimately sold to investors. The share-lending arrangement represents an agreement between the entity (i.e., the share lender) and an investment bank (i.e., the share borrower) and is intended to facilitate the ability of investors to hedge the conversion option in the convertible debt instruments. Typically, the arrangement requires...