Appendix A — Overview of Classification and Measurement Requirements in ASC 480
A.1 Outstanding Shares
ASC 480 requires liability classification for
outstanding shares that fall into any of the following categories of
instruments:
|
Settlement Terms
|
Initial Measurement
|
Subsequent Measurement
| |
|---|---|---|---|
|
Mandatorily redeemable financial instruments;
specifically, “shares that embody an unconditional
obligation requiring the issuer to redeem the instrument
by transferring its assets at a specified or
determinable date (or dates) or upon an event that is
certain to occur” (ASC 480-10-25-4 through 25-7; see
Sections 4.1
and 4.2)
|
Fixed settlement date and redemption amount
|
Fair value (see Section
4.3.1.1)
|
Present value of the settlement amount (see Section 4.3.1.2.1)
|
|
Variable settlement date or redemption amount
|
Fair value (see Section
4.3.1.1)
|
Amount of cash that would be paid if settlement occurred
on the reporting date (see Section 4.3.1.2.2)
| |
|
Outstanding shares that embody an
unconditional obligation that the issuer must or may
settle in a variable number of equity shares (see
Sections 6.1 and 6.2) if at inception the monetary value
of the obligation solely or predominantly has one of
three characteristics
|
The monetary value is fixed (see Section 6.1.2)
|
Fair value (see Section
6.3)
|
Amortized cost (see Section
6.3)
|
|
The monetary value is based on variations in something
other than the fair value of the issuer’s equity shares
(see Section
6.1.3)
|
Fair value (see Section
6.3)
|
Fair value (see Section
6.3)
| |
|
The monetary value is based on variations that are
inversely related to changes in the fair value of the
issuer’s equity shares (see Section 6.1.4)
|
Fair value (see Section
6.3)
|
Fair value (see Section
6.3)
| |
|
Noncontrolling interest with an embedded put and call
option combination that has certain characteristics (see
Section
7.1.2.1)
|
The options are exercisable on the same date and have
either the same fixed exercise price or prices that are
not significantly different.
|
Proceeds (see Section
7.1)
|
Present value of the strike price (see Section 7.1)
|
A.2 Financial Instruments Other Than Outstanding Shares
ASC 480 requires asset or liability
classification for financial instruments other than outstanding shares if they
fall into any of the following categories of instruments:
|
Settlement Terms
|
Initial Measurement
|
Subsequent Measurement
| |
|---|---|---|---|
|
Forward contracts that require physical settlement by
repurchase of a fixed number of shares for cash (see
Sections 5.1
and 5.3.1.1)
|
Fixed settlement date and redemption amount
|
Fair value of the shares at inception or the present
value of settlement amount (see Section 5.3.1.2)
|
Present value of the settlement amount (see Section 5.3.1.3.1)
|
|
Variable settlement date or redemption amount
|
Fair value of the shares at inception or the amount of
cash that would be paid if the shares were repurchased
at inception (see Section
5.3.1.2)
|
Amount of cash that would be paid if settlement occurred
on the reporting date (see Section 5.3.1.3.2)
| |
|
Other instruments that are not an outstanding share and
both (1) embody an obligation to repurchase the issuer’s
equity shares or are indexed to such an obligation and
(2) require or may require the issuer to settle the
obligation by transferring assets (see Sections 5.1 and
5.2)
|
Fair value (see Section
5.3.2)
|
Fair value or amortized cost, as
appropriate (see Section 5.3.2)
| |
|
Instruments that are not an outstanding
share and embody an unconditional or conditional
obligation that the issuer must or may settle in a
variable number of equity shares (see Sections
6.1 and 6.2) if at
inception the monetary value of the obligation solely or
predominantly has one of three characteristics
|
The monetary value is fixed (see Section 6.1.2)
|
Fair value (see Section
6.3)
|
Fair value (see Section
6.3)
|
|
The monetary value is based on variations in something
other than the fair value of the issuer’s equity shares
(see Section
6.1.3)
|
Fair value (see Section
6.3)
|
Fair value (see Section
6.3)
| |
|
The monetary value is based on variations that are
inversely related to changes in the fair value of the
issuer’s equity shares (see Section 6.1.4)
|
Fair value (see Section
6.3)
|
Fair value (see Section
6.3)
|