# ASC 321-10-55: Investments—Equity Securities — Overall — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/321/10/#55-implementation-guidance-and-illustrations) 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. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:fb6fa3b5cb285e7a502a6cad4ffae96df712179d0d86f4a73ec562c13b5ea26c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 321-10-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/321/10/#55-implementation-guidance-and-illustrations) SEC content: no #### Implementation Guidance ##### [321-10-55-1](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:3935c3247a38ef663d997dd69197018c3e869391239271bd4938f8d9772c05ec Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The implementation guidance in paragraphs [321-10-55-2 through 55-4](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-2) 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. ##### [321-10-55-2](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:9b2c38efc60ab139079d2b9238f2fde2f73efa4714eb690d3972ca5c858532d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If convertible preferred stock is not redeemable, it is considered an [equity security](https://asc.understandingaccounting.org/glossary/e/#equity-security "Any security representing an ownership interest in an entity (for example, common, preferred, or other capital stock) or the right to acquire (for example, warrants, rights, forward purchase contracts, and call options) or dispose of (for example, put options and forward sale contracts) an ownership interest in an entity at fixed or determinable prices. The term equity security does not include any of the following: Written equity options (because they represent obligations of the writer, not investments) Cash-settled options on equity securities or options on equity-based indexes (because those instruments do not represent ownership interests in an entity) Convertible debt or preferred stock that by its terms either must be redeemed by the issuing entity or is redeemable at the option of the investor.") and, therefore, this Topic would apply. ##### [321-10-55-3](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:b490469b73ca25b7f598a1e52cf62d6eeaaa6f7478f637e677f7e1d55286e033 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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)](https://asc.understandingaccounting.org/asc/815/10/#815-10-15-83). 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](https://asc.understandingaccounting.org/asc/815/10/#815-10-15-141A) provides guidance on applying the guidance in paragraph [815-10-15-141](https://asc.understandingaccounting.org/asc/815/10/#815-10-15-141) to forward contracts and purchased options to purchase securities within the scope of Topic 321. ##### [321-10-55-4](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:a51aba6636f77d726dd63185fb7d810bbbdbabd16b144dec466e3455be54bec6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/320/940/#320-940-35-1) with respect to broker-dealers and paragraph [942-405-25-1](https://asc.understandingaccounting.org/asc/405/942/#405-942-25-1) with respect to depository institutions). For guidance on evaluating whether a short sale transaction involves a derivative instrument, see paragraph [815-10-55-57](https://asc.understandingaccounting.org/asc/815/10/#815-10-55-57). ##### [321-10-55-5](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:c29cb6eb4279bdecdf0332c3a8864e0ebb4eae3dd73baa0bdf7ef203ad886a92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [970-323-25-10](https://asc.understandingaccounting.org/asc/323/970/#323-970-25-10) 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. ##### [321-10-55-6](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:67460308fa346e3c8c59ad0c57eee10fe67a39bb560a37903dcdb2bdfc46ae6e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [321-10-55-7](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:435dfe895dd01100d496f51360dd86ab72cea43622b89c35d7e43a9e1f46b01a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [321-10-55-8](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:9632911950fbcf8182205ae0496ab359aee3e6e95a5843b8c44c3af8a1ad8123 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [321-10-55-9](https://asc.understandingaccounting.org/asc/321/10/#321-10-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:39:13.832Z to 2026-09-09T23:39:13.832Z Record version: sha256:d04a8fff3fd58abd0cec73c4ea7bc5b24b65db7b410852916ec49ec9ba849dcc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/asc/321/10/#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.