Appendix A — Overview of Examples in ASC 815-40-55
ASC 815-40-55-26 through 55-48 contain 20 examples (numbered from 2 to 21) of the application of the guidance on indexation in ASC 815-40-15. The table below gives an overview of those examples. Chapter 4 discusses related accounting considerations.
Example Number (ASC Paragraph) | Contract
Type | Step 1: Exercise
Contingency? | Step 2: Settlement Adjustments? | Indexed
to Own
Equity? |
|---|---|---|---|---|
2 (ASC 815-40-55-26) | Warrant | Yes. IPO. | No | Yes |
3 (ASC 815-40-55-27) | Warrant | Yes. $100 million
in sales to third
parties. | No | Yes |
4 (ASC 815-40-55-28) | Warrant | Yes. Increase of 500
points in S&P 500. | No | No |
5 (ASC 815-40-55-29) | Warrant | Yes. IPO. | Yes. The strike price varies on the
basis of the price of gold. | No |
6 (ASC 815-40-55-30) | Warrant | No | Yes. Adjustment to offset effect of
merger announcement. | Yes |
7 (ASC 815-40-55-31) | Warrant | No | Yes. The strike price is reduced
by $0.50 after any year in which
revenue does not exceed $100
million. | No |
8 (ASC 815-40-55-32) | Option | No | Yes. The share price is capped. | Yes |
9 (ASC 815-40-55-33 and 55-34) | Warrant | No | Yes. Down-round protection. | Yes |
10 (ASC 815-40-55-35) | Warrant | No | Yes. Investor put option settleable
in shares and for a fixed monetary
amount if regulatory approval of a
drug compound is not obtained. | No |
11 (ASC 815-40-55-36) | Warrant | No | Yes. The strike price is denominated
in a currency other than the entity’s
functional currency. | No |
12 (ASC 815-40-55-37) | Forward | No | Yes. The strike price is adjusted if
dividends differ from expectations or
the cost of stock borrow increases. | Yes |
13 (ASC 815-40-55-38) | Forward | No | Yes. The strike price includes
interest that varies on the basis of
the Federal Funds rate plus a fixed
spread. The share price is specified
as a 30-day weighted average. | Yes |
14 (ASC 815-40-55-39) | Forward | No | Yes. The strike price includes interest
that varies inversely with changes in
LIBOR. | No |
15 (ASC 815-40-55-40) | Forward | No | Yes. The share price is subject to
both a floor and a cap. | Yes |
16 (ASC 815-40-55-41) | Forward | No | Yes. The number of shares depends
on the stock price. | Yes |
17 (ASC 815-40-55-42
and 55-43) | Forward | No | Yes. The strike price is subject to
antidilution adjustments (related
to stock dividend, ordinary cash
dividend, stock split, spinoff, rights
offering, recapitalization through a
large nonrecurring cash dividend,
below-market price issue of shares,
or above-market price repurchase of
shares). | Yes |
18 (ASC 815-40-55-44) | Forward | No | Yes. The strike price is denominated
in a currency other than the entity’s
functional currency. | No |
19 (ASC 815-40-55-45
and 55-46) | Convertible
debt | Yes. The debt
is convertible
contingent on
the entity’s stock
price (market
price trigger), the
debt’s trading price
(parity provision),
or a merger
announcement. | Yes. Additional make-whole shares
may be delivered on the basis of a
table with axes of stock price and
time (see Section 4.3.7.10). | Yes |
20 (ASC 815-40-55-47) | Convertible
debt | No | No. The debt is denominated in the
entity’s functional currency. (The
shares trade only on an exchange in
which trades are denominated in a
foreign currency.) | Yes |
21 (ASC 815-40-55-48) | Stock option
valuation
instrument | Maybe | Yes. Payments vary on the basis
of stock option exercise
behavior. | No |