8.2 Disclosure
ASC 480-10
50-1 Entities that issue financial instruments recognized under the guidance in Section 480-10-25 shall disclose both of the following:
- The nature and terms of the financial instruments
- The rights and obligations embodied in those instruments, including both:
- Settlement alternatives, if any, in the contract
- The entity that controls the settlement alternatives.
50-2 Additionally, for all outstanding financial instruments recognized under the guidance in Section 480-10-25 and for each settlement alternative, issuers shall disclose all of the following:
- The amount that would be paid, or the number of shares that would be issued and their fair value, determined under the conditions specified in the contract if the settlement were to occur at the reporting date
- How changes in the fair value of the issuer’s equity shares would affect those settlement amounts (for example, “the issuer is obligated to issue an additional X shares or pay an additional Y dollars in cash for each $1 decrease in the fair value of one share”)
- The maximum amount that the issuer could be required to pay to redeem the instrument by physical settlement, if applicable
- The maximum number of shares that could be required to be issued, if applicable
- That a contract does not limit the amount that the issuer could be required to pay or the number of shares that the issuer could be required to issue, if applicable
- For a forward contract or an option indexed to the issuer’s equity shares, all of the following:
- The forward price or option strike price
- The number of issuer’s shares to which the contract is indexed
- The settlement date or dates of the contract, as applicable.
50-3 Paragraph 505-10-50-3 requires additional disclosures for actual issuances and settlements that occurred during the accounting period.
The disclosure requirements in ASC 480 supplement those in ASC 505-10-50 related
to an entity’s capital structure and those in
other GAAP related to an entity’s liability and
equity instruments. Notably, ASC 505-10-50-3
requires disclosure of the pertinent rights and
privileges of securities outstanding, and ASC
505-10-50-11 requires disclosure of the amount of
redemption requirements associated with stock that
is redeemable at fixed or determinable prices on
fixed or determinable dates in each of the five
years after the date of the latest statement of
financial position presented.