In each episode of our What’s trending in SEC comments series, our guests bring you the latest themes in comment letters from the SEC’s Division of Corporation Finance for the most common topical areas of the financial statements.

This week we focus on debt, warrants, and equity. Tom Barbieri, a Deputy Chief Accountant in PwC’s National Office, and John Horan, Managing Director in PwC’s National Office, joined Heather Horn to break down some of the questions raised in these comments, giving you a deeper understanding of the SEC staff’s expectations, as well as context and insights into the GAAP requirements.

Topics include:

• 1:46 - What types of comments are companies getting? Tom and John discuss the main themes of comments. Common questions relate to SPAC warrants and earnouts, debt modifications, preferred stock, embedded derivatives, and EPS.
• 4:51 - SPAC warrants and earnouts. Accounting for SPAC warrants and earnouts can be complicated. John and Heather discuss the types of questions the SEC is asking on this topic and some best practices for determining the appropriate accounting.
• 17:34 - Debt modifications and extinguishments. Accounting for a troubled debt restructuring, debt modifications, or extinguishment can be complex. Tom and Heather discuss some tips for getting disclosures about these transactions right the first time.
• 23:51 - Preferred stock. John and Heather talk about the SEC staff’s interest in particular topical areas when asking about preferred stock. 
• 31:05 - Embedded derivatives. Tom and Heather discuss accounting for embedded conversion features and other redemption provisions, and the importance of providing the right level of context for these in your disclosures.
• 33:51 - Earnings per share. EPS has continued to be an ongoing area of focus for the SEC staff. John explains some of the areas that might give rise to a comment.
• 40:03 - Key takeaways and reminders. We close with some future areas to pay attention to and helpful advice for issuers to address these issues heading into year end. Heather tries to stump Tom and John with some niche accounting questions.

Want to learn more?
Listen to our previous comment letter podcasts: Revenue: What’s trending in SEC comments, Goodwill: What’s trending in SEC comments, and Inventory and cost of sales: What’s trending in SEC comments, Segment reporting: What’s trending in SEC comments
Financial statement presentation guide: Chapter 5: Stockholders’ Equity, Chapter 12: Debt, Chapter 19: Derivatives and Hedging

Transcripts available upon request for indi

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