# ASC 480-10-15: Distinguishing Liabilities from Equity — Overall — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/480/10/#15-scope-and-scope-exceptions) 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): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:d16cc4753536a083fd8293180c6af0207debbe3e6a890a77841a0ea1abdb2a5a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 480-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/480/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [480-10-15-1](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:6fa33c4cc3cccba4ac3ae1028170de639d6e97255f463695f122fdd829d605d7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Scope Section of the Overall Subtopic establishes the pervasive scope for the Distinguishing Liabilities from Equity Topic. #### Entities ##### [480-10-15-2](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:fa567787d9aca417a8edbdc3d7f0faf5ac147cc67cb2f4382e6d42df177a123c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Distinguishing Liabilities from Equity Topic applies to all entities. #### Instruments ##### [480-10-15-3](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:e95df680c0fbf998bf5eaa8045257b3acfdbd3ea6efb3472387411fc15ed2496 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Distinguishing Liabilities from Equity Topic applies to any [freestanding financial instrument](https://asc.understandingaccounting.org/glossary/f/#freestanding-financial-instrument "A financial instrument that meets either of the following conditions: It is entered into separately and apart from any of the entity's other financial instruments or equity transactions. It is entered into in conjunction with some other transaction and is legally detachable and separately exercisable."), including one that has any of the following attributes: 1. a Comprises more than one option or forward contract 2. b Has characteristics of both a liability and equity and, in some circumstances, also has characteristics of an asset (for example, a forward contract to purchase the [issuer's equity shares](https://asc.understandingaccounting.org/glossary/i/#issuer-s-equity-shares "The equity shares of any entity whose financial statements are included in the consolidated financial statements.") that is to be net cash settled). Accordingly, this Topic does not address an instrument that has only characteristics of an asset. ##### [480-10-15-4](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:283fb0d1e30d679eef096c546328ef51ab220221ec5ea62710c3d843f8ce9958 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, an instrument that consists of a written put option for an issuer's equity shares and a purchased call option and nothing else is a freestanding financial instrument (paragraphs [480-10-55-18 through 55-20](https://asc.understandingaccounting.org/asc/480/10/#480-10-55-18) provide examples of such instruments). That freestanding financial instrument embodies an [obligation](https://asc.understandingaccounting.org/glossary/o/#obligation "A conditional or unconditional duty or responsibility to transfer assets or to issue equity shares. Because Topic 480 relates only to financial instruments and not to contracts to provide services and other types of contracts, but includes duties or responsibilities to issue equity shares, this definition of obligation differs from the definition found in FASB Concepts Statement No. 6, Elements of Financial Statements, and is applicable only for items in the scope of that Topic. (P) December 16, 2024; (N) December 16, 2025105-10-65-9A conditional or unconditional duty or responsibility to transfer assets or to issue equity shares. This definition is applicable only for items within the scope of Topic 480.") to repurchase the issuer's equity shares and is subject to the requirements of this Topic. ##### [480-10-15-5](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-5) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:398656f7c52e32498f115167cb766f056e1733ecb14c3fa779126772bb08883b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because paragraph [480-10-15-3](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-3) limits the scope of this Topic to freestanding instruments, this Topic does not apply to a feature embedded in a [financial instrument](https://asc.understandingaccounting.org/glossary/f/#financial-instrument "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.") that is not a derivative instrument in its entirety. ##### [480-10-15-6](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:5f982f3c4240762b483fb556e62b924dedb51713e526d22e11dc20be6acf5e48 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraphs [480-10-55-53 through 55-58](https://asc.understandingaccounting.org/asc/480/10/#480-10-55-53) apply to the specific circumstances described by those paragraphs in which a majority owner enters into a transaction in the [shares](https://asc.understandingaccounting.org/glossary/s/#shares "Shares includes various forms of ownership that may not take the legal form of securities (for example, partnership interests), as well as other interests, including those that are liabilities in substance but not in form. (Business entities have interest holders that are commonly known by specialized names, such as stockholders, partners, and proprietors, and by more general names, such as investors, but all are encompassed by the descriptive term owners. Equity of business entities is, thus, commonly known by several names, such as owners' equity, stockholders' equity, ownership, equity capital, partners' capital, and proprietorship. Some entities [for example, mutual organizations] do not have stockholders, partners, or proprietors in the usual sense of those terms but do have participants whose interests are essentially ownership interests, residual interests, or both.)") of a consolidated subsidiary and a derivative instrument indexed to the [noncontrolling interest](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.") in that subsidiary. ##### [480-10-15-7](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:405d2fa332ec1858e84878db3429e84134a772d4a8abb986b94535f54a87047f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2017-11](https://asc.understandingaccounting.org/updates/asu-2017-11/). ##### [480-10-15-7A](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7A) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:cbef5f8716a306e4888c8104f2bb8b7428ff84c094f9aa4f29a8e3d9dec4e6a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The classification, measurement, and disclosure guidance in this Subtopic does not apply to [mandatorily redeemable financial instruments](https://asc.understandingaccounting.org/glossary/m/#mandatorily-redeemable-financial-instrument "Any of various financial instruments issued in the form of shares that embody an unconditional obligation requiring the issuer to redeem the instrument by transferring its assets at a specified or determinable date (or dates) or upon an event that is certain to occur.") that meet both of the following: 1. a They are issued by nonpublic entities that are not [Securities and Exchange Commission (SEC) registrants](https://asc.understandingaccounting.org/glossary/s/#securities-and-exchange-commission-registrant "An entity (or an entity that is controlled by an entity) that meets any of the following criteria: It has issued or will issue debt or equity securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets). It is required to file financial statements with the Securities and Exchange Commission (SEC). It provides financial statements for the purpose of issuing any class of securities in a public market."). 2. b They are mandatorily redeemable, but not on fixed dates or not for amounts that either are fixed or are determined by reference to an interest rate index, currency index, or another external index. ##### [480-10-15-7B](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7B) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:f37ab61b9b0a99fee95eaf311c07d2738f772e7b4601ad1cce806155d9028d82 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Mandatorily redeemable financial instruments issued by an SEC registrant are not eligible for the scope exception in paragraph [480-10-15-7A](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7A), even if the entity meets the definition of a [nonpublic entity](https://asc.understandingaccounting.org/glossary/n/#nonpublic-entity "Any entity other than one that meets any of the following criteria: Has equity securities that trade in a public market either on a stock exchange (domestic or foreign) or in an over-the-counter market, including securities quoted only locally or regionally Makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market Is controlled by an entity covered by the preceding criteria. An entity that has only debt securities trading in a public market (or that has made a filing with a regulatory agency in preparation to trade only debt securities) is a nonpublic entity."). ##### [480-10-15-7C](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7C) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:8fa8d66a03f5c0cc0137abd88dd8e6426a5979d9fbea0ac8d81a842756bf352f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some entities have issued shares that are required to be redeemed under related agreements. If the shares are issued with a redemption agreement and the required redemption relates to those specific underlying shares, the shares are mandatorily redeemable. If an entity with such shares and redemption agreement is a nonpublic entity that is not an SEC registrant, those mandatorily redeemable shares meet the scope exception in paragraph [480-10-15-7A](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7A) if they meet the conditions specified in that paragraph. ##### [480-10-15-7D](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7D) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:4f3df9540da6b68b5a73a09aa0797e41ae02767bd3afda35bfce91424febe83c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Although the disclosure requirements of this Subtopic do not apply for those mandatorily redeemable instruments of certain nonpublic companies that meet the scope exception in paragraph [480-10-15-7A](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7A), the requirements of Subtopic 505-10 still apply. In particular, paragraph [505-10-50-3](https://asc.understandingaccounting.org/asc/505/10/#505-10-50-3) requires information about the pertinent rights and privileges of the various securities outstanding, which includes mandatory redemption requirements. Paragraph [505-10-50-11](https://asc.understandingaccounting.org/asc/505/10/#505-10-50-11) also requires disclosure of the amount of redemption requirements for all issues of stock that are redeemable at fixed or determinable prices on fixed or determinable dates in each of the next five years. ##### [480-10-15-7E](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7E) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:5b959d361569195f6634a18ecdd49e96c424a7f779f03a59ec040369748099c8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to mandatorily redeemable noncontrolling interests (of all entities, public and nonpublic) as follows: 1. a The classification and measurement provisions of this Subtopic do not apply to mandatorily redeemable noncontrolling interests that would not have to be classified as liabilities by the subsidiary, under the only upon liquidation exception in paragraphs [480-10-25-4](https://asc.understandingaccounting.org/asc/480/10/#480-10-25-4) and [480-10-25-6](https://asc.understandingaccounting.org/asc/480/10/#480-10-25-6), but would be classified as liabilities by the parent in consolidated financial statements. 2. b The measurement provisions of this Subtopic do not apply to other mandatorily redeemable noncontrolling interests that were issued before November 5, 2003, both for the parent in consolidated financial statements and for the subsidiary that issued the instruments that result in the mandatorily redeemable noncontrolling interest. For those instruments, the measurement guidance for redeemable shares and noncontrolling interests in other predecessor literature (for example, in paragraph [480-10-S99-3A](https://asc.understandingaccounting.org/asc/480/10/#480-10-S99-3A)) continues to apply. ##### [480-10-15-7F](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7F) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:048aade06737b18f9d6929ddd5589cd902ac08d73d9f0655275cc19a117691b2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All public entities as well as nonpublic entities that are SEC registrants with mandatorily redeemable noncontrolling interests subject to the classification and measurement scope exception in paragraph [480-10-15-7E](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-7E) are required to follow the disclosure requirements in paragraphs [480-10-50-1 through 50-3](https://asc.understandingaccounting.org/asc/480/10/#480-10-50-1) as well as disclosures required by other applicable guidance. #### Topics and Subtopics Not within Scope ##### [480-10-15-8](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-8) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:83e2bf6959e56adc8dc8328c2cff99ce4d3b0b39078228a2d848352821e85613 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in the Distinguishing Liabilities from Equity Topic does not apply to an obligation under share-based compensation arrangements if that obligation is accounted for under Topic 718. For example, [employee stock ownership plan](https://asc.understandingaccounting.org/glossary/e/#employee-stock-ownership-plan "An employee stock ownership plan is an employee benefit plan that is described by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 as a stock bonus plan, or combination stock bonus and money purchase pension plan, designed to invest primarily in employer stock. Also called an employee share ownership plan.") shares or freestanding agreements to repurchase those shares are not within the scope of this Topic because those shares are accounted for under Subtopic 718-40 through the point of redemption. However, this Topic does apply to a freestanding financial instrument that was issued under a share-based compensation arrangement but is no longer subject to Topic 718. For example, this Topic applies to a mandatorily redeemable share issued upon a grantee's exercise of a share option. (Topic 718 provides accounting guidance for dividends on allocated shares, redemption of shares, recognition of expense, and computing earnings per share \[EPS\].) However, employee stock ownership plan shares that are mandatorily redeemable or freestanding agreements to repurchase those shares continue to be subject to other applicable guidance related to Subtopic 718-40. ##### [480-10-15-8A](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-8A) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:5226b40058708ec51a7f3379ded2a21bfd782f24322ceeecc4fbcb5e80675f97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Topic does not apply to the following instruments: 1. a [Registration payment arrangements](https://asc.understandingaccounting.org/glossary/r/#registration-payment-arrangement "An arrangement with both of the following characteristics: It specifies that the issuer will endeavor to do either of the following: File a registration statement for the resale of specified financial instruments and/or for the resale of equity shares that are issuable upon exercise or conversion of specified financial instruments and for that registration statement to be declared effective by the U.S. Securities and Exchange Commission (SEC) (or other applicable securities regulator if the registration statement will be filed in a foreign jurisdiction) within a specified grace period Maintain the effectiveness of the registration statement for a specified period of time (or in perpetuity). It requires the issuer to transfer consideration to the counterparty if the registration statement for the resale of the financial instrument or instruments subject to the arrangement is not declared effective or if effectiveness of the registration statement is not maintained. That consideration may be payable in a lump sum or it may be payable periodically, and the form of the consideration may vary. For example, the consideration may be in the form of cash, equity instruments, or adjustments to the terms of the financial instrument or instruments that are subject to the registration payment arrangement (such as an increased interest rate on a debt instrument).") within the scope of Subtopic 825-20. ##### [480-10-15-9](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-9) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:d15e101c92443a0e263268cc5b0751dc777ccc308dafa36d9dccdd9e085809af Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 805-30 provides guidance on the recognition and initial measurement of consideration issued in a business combination, including contingent consideration. 1. a [Subparagraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). 2. b [Subparagraph not used](https://asc.understandingaccounting.org/updates/page-1833002/). ##### [480-10-15-10](https://asc.understandingaccounting.org/asc/480/10/#480-10-15-10) Pending content: no Source downloaded (UTC): 2026-09-10T00:35:35.740Z to 2026-09-10T00:35:35.740Z Record version: sha256:5b7a3a8f4ec6927b328dfa797043689c65e8ec34f894ce7f621d2c844bf9d6e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. However, when recognized, a financial instrument within the scope of this Topic that is issued as consideration (whether contingent or noncontingent) in a business combination shall be classified pursuant to the requirements of this Topic.