Before you sign, the accounting consequences are still negotiable. After you sign, they’re not.
Your lawyers review the legal terms. Your tax advisors review the tax. But the accounting and reporting consequences of those same terms — how they hit your earnings, your covenants, your disclosures — usually go unread until the audit. By then the contract is signed, and no one can change the treatment; they can only tell you what you’re stuck with.
Reviewed before you sign, it’s a changed clause. Reviewed after, it’s a charge you carry every quarter.
Valenso, a specialist practice, reads the contract for those consequences before they harden — while there’s still room to change them.
What this looks like in practice
A company raises money through a convertible note — standard, plain-vanilla, the kind of instrument everyone at the table has seen a hundred times. Buried in the terms is one negotiated clause: on conversion, the note settles into a variable number of shares, set by a formula, rather than a fixed number.
That one clause changes the accounting. Because the settlement isn’t fixed-for-fixed, the conversion feature isn’t considered indexed to the company’s own stock — so it gets split out from the note and carried as a derivative, remeasured to fair value every quarter, with the swing running straight through earnings. The stock goes up, and the company books a loss. Every reporting period, on a financing it thought was simple.
At the term sheet, that’s a thirty-second read and a clause you renegotiate. After signing, it’s a number that moves your earnings every quarter for the life of the note — and no one can change it.
Valenso is the specialist practice of Dmitry Beresnev, CPA — 16 years in technical accounting, including Deloitte and a Director of Technical Accounting role, working the accounting consequences of complex contracts and transactions.
Working with Valenso
It starts with one live document — a term sheet, a draft agreement, whatever you’re closing now. You send it over, under NDA if you’d prefer; I read it for the accounting and reporting consequences in the terms; and you get back a short memo — what’s in there, what’s still negotiable, and what it costs you if it isn’t.
If the contract’s already signed, the same read finds what’s there before your auditors do.
If there’s more to look at, we scope it from there.