Company: ALCE
Filing Date: 2025-06-06
Form Type: 10-K
Source: 0001213900-25-052242
Chunk: 150

Company: Alternus Clean Energy, Inc.
Filing Date: 2025-06-06
Form: 10-K
Item: Item 1
Chunk 150
---
debt instruments in accordance with ASC 470-20, Debt with Conversion and Other Options. In accordance with ASU 2020-06, the Company does
not separately account for the embedded conversion feature of convertible instruments unless it meets the criteria for a derivative or
requires bifurcation under other applicable guidance.

Convertible debt is initially
recorded at its principal amount, net of any issuance costs, which are amortized to interest expense using the effective interest method
over the contractual term of the debt. Interest expense is recognized based on the stated coupon rate unless the instrument contains a
significant premium or discount.

If the convertible instrument
includes embedded features that qualify for derivative accounting, the fair value of such features is separated and accounted for as a
derivative liability, with changes in fair value recognized in the statement of operations (unless the Fair Value Option (FVO) is elected
with respect to the hybrid debt instrument).

Upon conversion or settlement
of the debt, the Company derecognizes the liability and records any difference between the carrying amount and the fair value of the consideration
transferred in equity or the income statement, as appropriate.

The Company evaluates its
convertible debt instruments for classification between liabilities and equity, as well as for potential beneficial conversion features
or other embedded features requiring separate accounting.

Fair Value Option – Hybrid Debt Instruments

The Company has elected the
fair value option under ASC 825-10, Financial Instruments – Fair Value Option, for certain hybrid debt instruments (identify specific
instruments and cross reference related Note) that contain embedded features which would otherwise require bifurcation and separate accounting
under ASC 815, Derivatives and Hedging. The election simplifies accounting by measuring the entire instrument at fair value, with changes
in fair value recognized in earnings. Fair value is determined using observable market data when available and valuation models when observable
inputs are not readily available. Changes in fair value attributable to both credit risk and market risk are recorded in Other income
(expense), net in the Consolidated Statement of Operations and Other Comprehensive Income/(Loss).

The initial fair value of
the instrument includes any embedded features. Transaction costs incurred in connection with the issuance of the instrument are expensed
as incurred in accordance with ASC 825-10-25-3. Instruments for which the fair value option has been elected are classified as short-term
or long-term liabilities based on their contractual maturity dates. The Company evaluates the appropriateness of the fair value measurement
hierarchy at each reporting period