Accounting for Financial Instruments with Characteristics of Both Liabilities and Equity

Author: Pat Patterson

Financial instruments that exhibit characteristics of both liabilities and equity present some of the most technically complex and judgment intensive challenges in financial reporting. This course provides an in depth, practical update on the accounting, classification, measurement, and disclosure requirements under FASB ASC Topic 480 and related guidance governing these hybrid instruments.

Participants will explore the origins of FAS 150 and its codification into ASC 480, review the categories of instruments subject to these rules, and examine recent standard setting developments affecting mandatorily redeemable instruments and convertible financial instruments. The course also addresses ASU 2020 to 2026, which significantly revised the accounting for convertible instruments and contracts in an entity’s own equity. Through clear explanations and real world context, this program equips professionals to apply current U.S. GAAP with confidence and consistency.

Publication Date: April 2026

Designed For
This course is designed for professionals who prepare, review, audit, or analyze financial statements involving complex financing arrangements.

Topics Covered

• Overview and update of FASB ASC Topic 480
• Historical background and objectives of FAS 150
• Categories of financial instruments with characteristics of both liabilities and equity
• Entities subject to ASC 480 requirements
• Accounting, classification, and measurement issues for hybrid instruments
• Disclosure and presentation requirements
• Mandatorily redeemable financial instruments and related accounting challenges
• ASU 2020‑06: accounting for convertible instruments and contracts in an entity’s own equity
• Current issues and emerging developments in hybrid financial instrument accounting

Learning Objectives

• Identify accounting issues associated with financial instruments that have characteristics of both liabilities and equity
• Explain the origins and objectives of FAS 150 and its incorporation into FASB ASC Topic 480
• Apply U.S. GAAP classification, measurement, and presentation rules for instruments subject to ASC 480
• Distinguish among categories of financial instruments that fall within the scope of ASC 480
• Recognize reporting and disclosure requirements applicable to these hybrid financial instruments
• Explain the impact of ASU 2020 to 2026 on convertible instruments and contracts in an entity’s own equity
• Evaluate issues related to mandatorily redeemable financial instruments, including the elimination of indefinite deferrals for certain nonpublic entities

Level
Intermediate

Instructional Method
Self-Study

NASBA Field of Study
Accounting (2 hours)

Program Prerequisites
Basic understanding of accounting for financial instruments

Advance Preparation
None