Financial instruments that enable their holders to obtain ordinary shares and reduce (dilute) earnings per share (EPS) by increasing the number of shares outstanding, if converted or exercised
The degree to which one company (investor) acquires an interest in ordinaryshares of another company (investee) generally determines the accountingtreatment for the investment after the acquisition
Downsides of fair value accounting include uncertainty in measurement, more judgment and subjective estimates required by managers, and potential bias in information
Fair value accounting was heavily debated after the banking crisis, with some arguing it intensified the crisis by requiring recognition of unrealized losses
Some market commentators suggest Netflix Inc. could finance its new productions by issuing convertible bonds instead of regular bonds to save on interest costs and reduce dilutive effect of a normal equity raise.
An investment (direct or indirect) of 20% or more of the voting shares of an investee should lead to a presumption that in the absence of evidence to the contrary, an investor has the ability to exercise significant influence, but not control, over an investee
The investor must account for the investment using the equity method