{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/321/10/#55-implementation-guidance-and-illustrations","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":"321","topic_title":"Investments—Equity Securities","subtopic":"321-10","subtopic_title":"Overall","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Implementation Guidance","paragraphs":[{"citation":"321-10-55-1","para":"55-1","html":"
The implementation guidance in paragraphs
321-10-55-2 through 55-4
discusses the scope application of this Topic to the following instruments and transactions.
  1. a
    Convertible preferred stock
  2. b
    Call options and forward contracts on equity securities
  3. c
    Short sales of equity securities.
","snippet":"The implementation guidance in paragraphs 321-10-55-2 through 55-4 discusses the scope application of this Topic to the following instruments and transactions.\n(a) Convertible preferred stock\n(b) Call options and forward…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3935c3247a38ef663d997dd69197018c3e869391239271bd4938f8d9772c05ec","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-2","para":"55-2","html":"
If convertible preferred stock is not redeemable, it is considered an equity security and, therefore, this Topic would apply.
","snippet":"If convertible preferred stock is not redeemable, it is considered an equity security and, therefore, this Topic would apply.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9b2c38efc60ab139079d2b9238f2fde2f73efa4714eb690d3972ca5c858532d2","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-3","para":"55-3","html":"
An option to buy an equity security that does not meet the definition of a derivative instrument is within the scope of this Topic. An investment in an option on securities should be accounted for under the requirements of Subtopic 815-10 if the option meets the definition of a derivative instrument, including the criteria for net settlement in paragraph 815-10-15-83(c). This Topic applies to those forward contracts and options that are not derivative instruments subject to Subtopic 815-10 but that involve the acquisition of securities that will be accounted for under this Topic. Paragraph 815-10-15-141A provides guidance on applying the guidance in paragraph 815-10-15-141 to forward contracts and purchased options to purchase securities within the scope of Topic 321.
","snippet":"An option to buy an equity security that does not meet the definition of a derivative instrument is within the scope of this Topic. An investment in an option on securities should be accounted for under the requirements …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b490469b73ca25b7f598a1e52cf62d6eeaaa6f7478f637e677f7e1d55286e033","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-4","para":"55-4","html":"
Sales of securities that the seller does not own at the time of sale are obligations to deliver securities, not investments. Short sale obligations are addressed in the guidance for certain industries (see paragraph 940-320-35-1 with respect to broker-dealers and paragraph 942-405-25-1 with respect to depository institutions). For guidance on evaluating whether a short sale transaction involves a derivative instrument, see paragraph 815-10-55-57.
","snippet":"Sales of securities that the seller does not own at the time of sale are obligations to deliver securities, not investments. Short sale obligations are addressed in the guidance for certain industries (see paragraph 940-…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a51aba6636f77d726dd63185fb7d810bbbdbabd16b144dec466e3455be54bec6","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-5","para":"55-5","html":"
Paragraph 970-323-25-10 explains that an investment in a corporate subsidiary that is a real estate venture shall be accounted for by the investor-parent using the principles applicable to investments in subsidiaries rather than those applicable to investments in corporate joint ventures. That is, that paragraph requires that noncontrolling shareholders in such a real estate venture should account for their investment using the principles applicable to investments in common stock set forth in Topic 323 or this Topic as applicable.
","snippet":"Paragraph 970-323-25-10 explains that an investment in a corporate subsidiary that is a real estate venture shall be accounted for by the investor-parent using the principles applicable to investments in subsidiaries rat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c29cb6eb4279bdecdf0332c3a8864e0ebb4eae3dd73baa0bdf7ef203ad886a92","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-6","para":"55-6","html":"
An entity should not look through the form of its investment to the nature of the securities held by an investee to determine whether the scope of this Topic applies.
","snippet":"An entity should not look through the form of its investment to the nature of the securities held by an investee to determine whether the scope of this Topic applies.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67460308fa346e3c8c59ad0c57eee10fe67a39bb560a37903dcdb2bdfc46ae6e","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-7","para":"55-7","html":"
For example, an entity invests in a limited partnership interest (or a venture capital entity) that meets the definition of an equity security. However, substantially all of the partnership's assets consist of investments in debt securities or equity securities. It is not appropriate to look through the form of an investment to determine whether this Topic applies. In the specific situation described in this paragraph, the investment would be considered an equity security. So, this Topic would apply to that type of investment. (Subtopic 323-30 provides guidance on the accounting for limited partnership investments.) Another example of an investment that is considered an equity security is an investment in a mutual fund that invests only in U.S. government debt securities.
","snippet":"For example, an entity invests in a limited partnership interest (or a venture capital entity) that meets the definition of an equity security. However, substantially all of the partnership's assets consist of investment…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:435dfe895dd01100d496f51360dd86ab72cea43622b89c35d7e43a9e1f46b01a","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-8","para":"55-8","html":"
To identify observable price changes, an entity should consider relevant transactions that occurred on or before the balance sheet date that are known or can reasonably be known. To identify price changes that can reasonably be known, the entity should make a reasonable effort (that is without expending undue cost and effort) to identify any observable transactions that it may not be readily aware of. The entity need not conduct an exhaustive search for all observable price changes.
","snippet":"To identify observable price changes, an entity should consider relevant transactions that occurred on or before the balance sheet date that are known or can reasonably be known. To identify price changes that can reason…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9632911950fbcf8182205ae0496ab359aee3e6e95a5843b8c44c3af8a1ad8123","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},{"citation":"321-10-55-9","para":"55-9","html":"
To identify whether a security issued by the same issuer is similar to the equity security held by the entity, the entity should consider the different rights and obligations of the securities. Differences in rights and obligations could include characteristics such as voting rights, distribution rights and preferences, and conversion features. The entity should adjust the observable price of a similar security for the different rights and obligations to determine the amount that should be recorded as an upward or downward adjustment in the carrying value of the security measured in accordance with paragraph 321-10-35-2 to reflect the fair value of the security as of the date that the observable transaction for the similar security took place.
","snippet":"To identify whether a security issued by the same issuer is similar to the equity security held by the entity, the entity should consider the different rights and obligations of the securities. Differences in rights and …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d04a8fff3fd58abd0cec73c4ea7bc5b24b65db7b410852916ec49ec9ba849dcc","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f9262fe2a12e00889a31d072db1a64e929e5d8fc1c6ad52ef0172a5bf2eee7e","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb6fa3b5cb285e7a502a6cad4ffae96df712179d0d86f4a73ec562c13b5ea26c","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:fb6fa3b5cb285e7a502a6cad4ffae96df712179d0d86f4a73ec562c13b5ea26c","downloaded_from":"2026-09-09T23:39:13.832Z","last_downloaded_at":"2026-09-09T23:39:13.832Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479504","source_sha256":"5753c4c6d8ff9b957d21276bd11ae314f6c5f622e65b1428bef0c3f7540a0f28"}}