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Triage screen. ASC 815-40 indexation + settlement test. Final classification requires written technical accounting memo.
ASC 815-40 + SEC APRIL 2021 STATEMENT

Warrant Accounting Classification Test

9 questions on indexation to entity's own stock, settlement provisions, down-round protection, fundamental transaction outcomes. Get a preliminary Liability vs Equity classification, the trigger that drove it, and the disclosure + measurement consequences.

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Honest limits: ASC 815-40 classification is highly fact-specific and small drafting differences in the warrant agreement drive different outcomes. The SEC's April 12, 2021 Statement on Accounting and Reporting Considerations for Warrants Issued by SPACs caused hundreds of restatements specifically because of net cash settlement provisions that issuers had previously concluded were equity. This tool is a triage screen. The final classification must come from a written technical accounting memo prepared by a qualified person, reviewed by the audit firm, and supported by reading the actual warrant agreement language. For hands-on support on warrant memos: Reach out.
What this tool does NOT do:
  • Read the actual warrant agreement. Language drives the classification, not your description
  • Calculate the fair value at issuance (Black-Scholes / Monte Carlo) or remeasure at each reporting date
  • Down-round trigger event analysis under ASC 815-40-15-5D (post-ASU 2017-11 alternative for private companies)
  • Modification accounting if warrants are amended post-issuance
  • Embedded derivative bifurcation if warrants are part of a host instrument
  • Tax effect on warrant liability changes (deferred tax considerations)
  • EPS treatment (diluted EPS. Treasury method vs if-converted)