The Question and Answer Board

[trader guy]

Thanks. I had already searched and read that definition. I should have been more specific in my question. What I am most interested in is how derivative liabilities relate to convertible debt. As in, does the amount shown as a derivative liability represent the actual amount needing to be paid, or is it automatically extinguished when the convertible debt is converted to shares or paid off, and has nothing to do with the actual dollar amount converted? From from this site http://www.wikinvest.com/stock/US_DATAWORKS_%28UDW%29/Convertible_Debt_Financing_8212_Derivative_Liabilities it appears it does as it seems to account for the total liabilities the convertible debt could have if not paid off conventionally, but defaulted on triggering default mechanisms in the debt contract.