Chapter 9 — The SEC's Guidance on Temporary Equity | DART

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Chapter 9 — The SEC's Guidance on Temporary Equity

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Chapter 9 — The SEC’s Guidance on Temporary Equity

9.1 Overview and Sources of Guidance

9.1.1 SEC Staff Announcements, Speeches, and Discussions

9.1.2 SEC Rules and Policies

9.1.3 SEC Staff Accounting Bulletins

9.1.4 SEC Staff Announcements and Observer Comments Made at EITF Meetings

9.2 Scope — Entities

9.2.1 SEC Registrants

9.2.2 Nonpublic Entities

9.3 Scope — Instruments

9.3.1 Equity Instruments

9.3.2 Assets and Liabilities

9.3.3 Freestanding Equity-Classified Contracts (Other Than Outstanding Shares)

9.3.4 Hybrid Equity Instruments and Embedded Derivatives

9.3.5 Convertible Debt Instruments Separated Into Liability and Equity Components

9.3.6 Equity Instruments Subject to Registration Payment Arrangements

9.3.7 Noncontrolling Interests

9.3.8 Securities Held by an ESOP

9.3.9 Share-Based Payment Arrangements

9.3.10 Separate Financial Statements of a Subsidiary

9.4 Classification

9.4.1 Characteristics That Trigger Temporary Equity Classification

9.4.2 Evaluation of Whether an Event Is Under the Sole Control of the Issuer

9.4.3 Redemption Features Triggered by Holder’s Death or Disability

9.4.4 Special Considerations When the Holder Has the Ability to Control Issuer Decisions

9.4.5 Evaluation of Liquidation Provisions

9.4.6 Features That the Issuer Must or May Settle in Its Equity Shares

9.4.7 Features That the Issuer Must or May Settle in Redeemable Instruments

9.4.8 Convertible Debt Instruments Separated Into Liability and Equity Components

9.4.9 Share-Based Payment Arrangements

9.4.10 Classification of ESOP Shares Within Temporary Equity

9.5 Measurement

9.5.1 Initial Measurement

9.5.2 Subsequent Measurement

9.5.3 Assessment of Whether an Instrument Is Currently Redeemable

9.5.4 Assessing Whether It Is Probable That an Instrument Will Become Redeemable

9.5.5 Recognition of Measurement Changes and Dividends

9.5.6 Bifurcated Embedded Derivatives

9.5.7 Convertible Debt With a Separated Equity Component

9.5.8 Convertible Preferred Stock With a Separated Equity Component

9.5.9 Redeemable Equity Instruments Issued With Other Instruments

9.5.10 Noncontrolling Interests

9.5.11 Equity Securities Held by ESOPs

9.5.12 Share-Based Payment Arrangements

9.6 EPS Considerations

9.6.1 Preferred Stock

9.6.2 Common Stock

9.6.3 Noncontrolling Interests

9.6.4 Convertible Debt With Separated Equity Component

9.7 Derecognition

9.7.1 Extinguishments

9.7.2 Conversions

9.7.3 Modifications and Exchanges

9.7.4 Reclassifications

9.7.5 Deconsolidation of a Subsidiary

9.8 Presentation and Disclosure

9.8.1 Presentation

9.8.2 Disclosure

Confidential and Proprietary — for Use Solely by Authorized Personnel

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.