Wiley GAAP 2019

35ASC 480 DISTINGUISHING LIABILITIES FROM EQUITY

PERSPECTIVE AND ISSUES

Subtopic

ASC 480, Distinguishing Liabilities from Equity Topic, contains one subtopic:

• ASC 480-10, Overall, which provides guidance on how an issuer classifies and measures financial instruments with characteristics of both liabilities and equity.

Technical Alert

In July 2017, the FASB issued ASU 2017-11. The ASU is in two parts and is titled Earnings Per Share (Topic 260), Distinguishing Liabilities from Equity (Topic 480), Derivatives and Hedging (Topic 815), I. Accounting for Certain Financial Instruments with Down Round Features, II. Replacement of the Indefinite Deferral for Mandatorily Redeemable Financial Instruments of Certain Nonpublic entities and Certain Mandatorily Redeemable Noncontrolling Interests with a Scope Exception.

The ASU addresses narrow issues related to the complexity of applying GAAP to certain financial instruments with characteristics of liabilities and equity. This Technical Alert addresses with Part II of the ASU. The chapter on ASC 260 deals Part I of the ASU. The objective of the ASU is to improve:

• The accounting for instruments with “down-round” provisions and
• The readability of the guidance in ASC 480 on distinguishing liabilities from equity by replacing the indefinite deferral of certain pending content with scope exceptions.

Extant guidance in ASC 480-10 indefinitely deferred some of the requirements for certain mandatorily redeemable financial instruments of nonpublic ...