The subsequent measurement
guidance that applies to forward contracts that require physical settlement
by repurchase of a fixed number of the issuer’s equity shares in exchange
for cash is similar to the guidance applicable to mandatorily redeemable
financial instruments (see Section 4.3
). Thus, the “debt” component of such a forward
contract is measured subsequently in one of two ways depending on whether
the repurchase amount or the repurchase date varies on the basis of
In the example in ASC
480-10-55-14, no consideration or other rights or privileges are exchanged
at the inception of the contract, and the fair value of the shares at
inception is $25 million. Under ASC 480-10-30-3, the liability is initially
recognized at an amount equal to fair value of the shares at inception ($25
million). In accordance with ASC 480-10-30-5, the offsetting entry is to
equity. Accordingly, the accounting entries at inception are (in
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This publication provides comprehensive guidance; however, it does not address all possible fact patterns, and the guidance is subject to change. Consult a Deloitte & Touche LLP professional regarding your specific issues and questions.
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