{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/505/10/#05-overview-and-background","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":"505","topic_title":"Equity","subtopic":"505-10","subtopic_title":"Overall","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"505-10-05-1","para":"05-1","html":"
The Equity Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Stock Dividends and Stock Splits
  3. c
    Treasury Stock
  4. d
    Subparagraph superseded by Accounting Standards Update No. 2018-07.
  5. e
    Spinoffs and Reverse Spinoffs.
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The Overall Subtopic addresses financial accounting and reporting for equity-related matters not specifically addressed in the other Subtopics of the Equity Topic or other Topics that also address equity matters.
","snippet":"The Overall Subtopic addresses financial accounting and reporting for equity-related matters not specifically addressed in the other Subtopics of the Equity Topic or other Topics that also address equity matters.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f87ecfb67e49af2cc2268bde05f4fce7c6ac72c16634fcb5f4edde7cc4634c11","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}},{"citation":"505-10-05-3","para":"05-3","html":"
Equity, sometimes referred to as net assets, is the residual interest in the assets of an entity that remains after deducting its liabilities. The Subtopics of the Equity Topic provide guidance on several specific elements of transactions, accounts and financial instruments that are classified as components of equity as well as overall general guidance related to equity. Issues that relate to whether a specific financial instrument shall be classified as equity or outside of the equity classification are addressed in Topic 480 as well as other Topics (such as Topic 815 on derivatives and hedging) that address these classification matters.
","snippet":"Equity, sometimes referred to as net assets, is the residual interest in the assets of an entity that remains after deducting its liabilities. The Subtopics of the Equity Topic provide guidance on several specific elemen…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4890b0893f218bf017c2fb233f6e136f3eb3e47711fdbf2bc996233148ddc900","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}},{"citation":"505-10-05-4","para":"05-4","html":"
Other Topics, including industry-specific Topics, also contain guidance related to specific equity matters associated with those Topics. Equity guidance in those Topics is intended to be incremental to the guidance otherwise established in this Topic.
","snippet":"Other Topics, including industry-specific Topics, also contain guidance related to specific equity matters associated with those Topics. Equity guidance in those Topics is intended to be incremental to the guidance other…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:043b07139d00e95e4577611928aea6df3879daafe7f55fc656d223ebf38c2290","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78e3689b9f7c2a4ec65cb6bba3acdda93f94f2428609b334f0e1a7e4ef5df9f3","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}},{"block":null,"heading":"Convertible Preferred Stock","paragraphs":[{"citation":"505-10-05-5","para":"05-5","html":"
Entities may issue convertible preferred stock that may be convertible into common stock at the lower of a conversion rate fixed at time of issuance and a fixed discount to the market price of the common stock at the date of conversion.
","snippet":"Entities may issue convertible preferred stock that may be convertible into common stock at the lower of a conversion rate fixed at time of issuance and a fixed discount to the market price of the common stock at the dat…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7ac9e404159cdf514fa988ce0251a1157b3bddb498794e6f21ab30875943b39e","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}},{"citation":"505-10-05-6","para":"05-6","html":"
Certain convertible preferred stock may have a contingently adjustable conversion ratio. Examples of a conversion price that is variable based on future events are the following:
  1. a
    A liquidation or a change in control of an entity
  2. b
    A subsequent round of financing at a price lower than the convertible security's original conversion price
  3. c
    An initial public offering at a share price lower than an agreed-upon amount.
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Certain convertible preferred stock may become convertible only upon the occurrence of a future event outside the control of the holder.
","snippet":"Certain convertible preferred stock may become convertible only upon the occurrence of a future event outside the control of the holder.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2f2da9ddd6f456e533e745f04cf9a53a9a666f0e565dbad11d9e08c67aa02f58","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a898f6746456655526d71b22af97222ffa9eae2e39d4f6d5d79305317181a736","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a8616f829f71da43587341d3d3c38f7bb83734d76e760741f52df51606f1244","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2a8616f829f71da43587341d3d3c38f7bb83734d76e760741f52df51606f1244","downloaded_from":"2026-09-10T00:36:34.119Z","last_downloaded_at":"2026-09-10T00:36:34.119Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147481288","source_sha256":"268a30fa104650c9dd53553ecdbe3ee6db98b8f1358b5f12d0b94d7660629271"}}