{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/260/10/#30-initial-measurement","source":"FASB Accounting Standards Codification, Basic View","usage":"Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.","topic":"260","topic_title":"Earnings Per Share","subtopic":"260-10","subtopic_title":"Overall","section":{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":null,"heading":"Financial Instruments That Include a Down Round Feature","paragraphs":[{"citation":"260-10-30-1","para":"30-1","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_7A9ACEAD-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">As of the date that a <a href=\"/glossary/d/#down-round-feature\" class=\"term\" title=\"A feature in a financial instrument that reduces the strike price of an issued financial instrument if the issuer sells shares of its stock for an amount less than the currently stated strike price of the issued financial instrument or issues an equity-linked financial instrument with a strike price below the currently stated strike price of the issued financial instrument. A down round feature may reduce the strike price of a financial instrument to the current issuance price, or the reduction may be limited by a floor or on the basis of a formula that results in a price that is at a discount to the original exercise price but above the new issuance price of the shares, or may reduce the strike price to below the current issuance price. A standard antidilution provision is not considered a down round feature.\"><span>down round feature</span></a> is triggered (that is, upon the occurrence of the triggering event that results in a reduction of the strike price) in an equity-classified freestanding <a href=\"/glossary/f/#financial-instrument\" class=\"term\" title=\"Cash, evidence of an ownership interest in an entity, or a contract that both: Imposes on one entity a contractual obligation either: To deliver cash or another financial instrument to a second entity To exchange other financial instruments on potentially unfavorable terms with the second entity. Conveys to that second entity a contractual right either: To receive cash or another financial instrument from the first entity To exchange other financial instruments on potentially favorable terms with the first entity. The use of the term financial instrument in this definition is recursive (because the term financial instrument is included in it), though it is not circular. The definition requires a chain of contractual obligations that ends with the delivery of cash or an ownership interest in an entity. Any number of obligations to deliver financial instruments can be links in a chain that qualifies a particular contract as a financial instrument. Contractual rights and contractual obligations encompass both those that are conditioned on the occurrence of a specified event and those that are not. All contractual rights (contractual obligations) that are financial instruments meet the definition of asset (liability) set forth in FASB Concepts Statement No. 6, Elements of Financial Statements, although some may not be recognized as assets (liabilities) in financial statements—that is, they may be off-balance-sheet—because they fail to meet some other criterion for recognition. For some financial instruments, the right is held by or the obligation is due from (or the obligation is owed to or by) a group of entities rather than a single entity. (P) December 16, 2024; (N) December 16, 2025105-10-65-9Cash, evidence of an ownership interest in an entity, or a contract that both: Imposes on one entity a contractual obligation either: To deliver cash or another financial instrument to a second entity To exchange other financial instruments on potentially unfavorable terms with the second entity. Conveys to that second entity a contractual right either: To receive cash or another financial instrument from the first entity To exchange other financial instruments on potentially favorable terms with the first entity. The use of the term financial instrument in this definition is recursive (because the term financial instrument is included in it), though it is not circular. The definition requires a chain of contractual obligations that ends with the delivery of cash or an ownership interest in an entity. Any number of obligations to deliver financial instruments can be links in a chain that qualifies a particular contract as a financial instrument. Contractual rights and contractual obligations encompass both those that are conditioned on the occurrence of a specified event and those that are not. Some contractual rights (contractual obligations) that are financial instruments may not be recognized in financial statements—that is, they may be off-balance-sheet—because they fail to meet some other criterion for recognition. For some financial instruments, the right is held by or the obligation is due from (or the obligation is owed to or by) a group of entities rather than a single entity.\"><span>financial instrument</span></a></span></span><span class=\"sfragment\" id=\"sfr_7A9AD003-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">and an equity-classified convertible preferred stock (if the conversion feature has not been bifurcated in accordance with other guidance),</span></span><span class=\"sfragment\" id=\"sfr_7A9AD0E5-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"> an entity shall measure the value of the effect of the feature as the difference between the following amounts determined immediately after the down round feature is triggered: </span></span><ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\"><span class=\"sfragment\" id=\"sfr_7A9AD24C-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The fair value of the financial instrument (without the down round feature) with a strike price corresponding to the currently stated strike price of the issued instrument (that is, before the strike price reduction)</span></span></div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\"><span class=\"sfragment\" id=\"sfr_7A9AD35A-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The fair value of the financial instrument (without the down round feature) with a strike price corresponding to the reduced strike price upon the down round feature being triggered.</span></span></div></li></ol></div></div>","snippet":"As of the date that a down round feature is triggered (that is, upon the occurrence of the triggering event that results in a reduction of the strike price) in an equity-classified freestanding financial instrumentand an…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b6c04c56322cf74363ee713df37c8aadcdd02427790b52a7bdddd28bdac7bd50","downloaded_from":"2026-09-09T23:19:00.033Z","last_downloaded_at":"2026-09-09T23:19:00.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482542","source_sha256":"6681fd071e1c1c4901f88c3654850d0654c63ab9bf99a9bf74cd23180c9c4cf1"}},{"citation":"260-10-30-2","para":"30-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_7A9AD43E-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The fair values of the financial instruments in paragraph <a href=\"/asc/260/10/#260-10-30-1\" class=\"xref\">260-10-30-1</a> shall be measured in accordance with the guidance in Topic <a altsource=\"GUID-0C8D9651-1182-4A36-827F-0C71E4C9D9F4.ditamap\" class=\"ditamap\">820</a> on fair value measurement. See paragraph <a href=\"/asc/260/10/#260-10-45-12B\" class=\"xref\">260-10-45-12B</a> for related <a href=\"/glossary/e/#earnings-per-share\" class=\"term\" title=\"The amount of earnings attributable to each share of common stock. For convenience, the term is used to refer to either earnings or loss per share.\"><span>earnings per share</span></a> guidance and paragraphs <a href=\"/asc/505/10/#505-10-50-3\" class=\"xref\">505-10-50-3 through 50-3A</a> for related disclosure guidance. </span></span></div></div>","snippet":"The fair values of the financial instruments in paragraph 260-10-30-1 shall be measured in accordance with the guidance in Topic 820 on fair value measurement. See paragraph 260-10-45-12B for related earnings per share g…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e2567edd465a0fd5c06d53700d0abc4f6fc1438841f8271f877654c7b2361f94","downloaded_from":"2026-09-09T23:19:00.033Z","last_downloaded_at":"2026-09-09T23:19:00.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482542","source_sha256":"6681fd071e1c1c4901f88c3654850d0654c63ab9bf99a9bf74cd23180c9c4cf1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:87a01a9023559b1f665b95d79b77cfb0ced4acc2a66ac7f3149f94993858db9d","downloaded_from":"2026-09-09T23:19:00.033Z","last_downloaded_at":"2026-09-09T23:19:00.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482542","source_sha256":"6681fd071e1c1c4901f88c3654850d0654c63ab9bf99a9bf74cd23180c9c4cf1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cf436dacb1ee99ed940838c7a8dda95ea0aa96b4b202db117a383ee8d1c36dc","downloaded_from":"2026-09-09T23:19:00.033Z","last_downloaded_at":"2026-09-09T23:19:00.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482542","source_sha256":"6681fd071e1c1c4901f88c3654850d0654c63ab9bf99a9bf74cd23180c9c4cf1"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6cf436dacb1ee99ed940838c7a8dda95ea0aa96b4b202db117a383ee8d1c36dc","downloaded_from":"2026-09-09T23:19:00.033Z","last_downloaded_at":"2026-09-09T23:19:00.033Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482542","source_sha256":"6681fd071e1c1c4901f88c3654850d0654c63ab9bf99a9bf74cd23180c9c4cf1"}}