# ASC 810-30: Consolidation — Research and Development Arrangements Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/810/30/) 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): 2026-09-10T01:30:05.404Z to 2026-09-10T01:30:33.354Z Record version: sha256:9f7a1527c1e209f26079dd56ae99d4e8b66f62567336eb1827099660710fb17d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30: Consolidation — Research and Development Arrangements ### Machine-generated study aids ```json { "summary": "ASC 810-30 tells a sponsor how to account for a research and development arrangement in which the sponsor funds 100% of the R&D activities — typically by capitalizing a new entity (Newco) with cash and technology rights, spinning off Newco's Class A common stock to the sponsor's shareholders, and retaining a purchase option and nominal Class B shares. The sponsor reclassifies the contributed cash as restricted cash, recognizes R&D expense as the activities are performed, and records the Class A distribution as a dividend at the fair value of that stock. The Class A stock is presented as noncontrolling interest classified in equity but separate from the parent's equity, and exercise of the purchase option is accounted for like an acquisition of a noncontrolling interest.", "key_points": [ "Scope is limited to research and development arrangements in which all funds for the R&D activities are provided by the sponsor (810-30-15-2); arrangements funded by third parties fall under Subtopic 730-20 (810-30-15-3(a)).", "The VIE guidance in the Variable Interest Entities Subsections of Subtopic 810-10 must be applied first; if the legal entity is consolidated as a VIE, this Subtopic does not apply (810-30-15-3(b)).", "The sponsor must (a) reclassify cash contributed to the new entity as restricted cash at the time of distribution of the Class A common stock, (b) recognize research and development expense as the R&D activities are performed, and (c) account for the distribution of the Class A common stock as a dividend to its common stockholders (810-30-25-3).", "The dividend is measured at the fair value of the new entity's Class A common stock and recorded at the time of distribution to the sponsor's stockholders (810-30-30-1).", "If the purchase option is exercised, the excess of the exercise price over the carrying amount of the Class A common stock is allocated to assets acquired (generally in-process or completed R&D) and liabilities assumed, like an acquisition of a noncontrolling interest (810-30-35-1).", "If the purchase option expires unexercised, the Class A common stock is reclassified to additional paid-in capital as an adjustment to the initial dividend (810-30-35-1).", "The Class A common stock is presented as a noncontrolling interest classified as equity but separate from the parent's equity (810-30-45-1), and the sponsor's R&D expense is not allocated to the Class A stock in computing income available to common stockholders for EPS (810-30-45-2)." ], "categories": [ "Consolidation", "Presentation", "Recognition", "Initial measurement" ], "audience_level": "advanced", "student_note": "This is a narrow, structure-specific rule aimed at \"R&D spin-off\" vehicles used to keep development costs off the sponsor's books — the point is that the sponsor still expenses the R&D and cannot treat the spun-off entity as a true third-party funder. The most common mistake is skipping the ordering rule: you must test the new entity under the VIE guidance in 810-10 first, and only if it is not a consolidated VIE (and the sponsor provides all the funding) do you apply 810-30.", "related_topics": [ "730-20", "810-10", "808", "730-10", "805" ], "key_concepts": [ "research and development arrangement", "sponsor", "spin-off of class a common stock", "restricted cash", "dividend measured at fair value", "purchase option", "noncontrolling interest", "in-process research and development" ] } ``` Source downloaded (UTC): 2026-09-10T01:30:05.404Z to 2026-09-10T01:30:05.404Z Record version: sha256:6fa16187106b1f37d0a1c0b3c049ad41af838fc23de865a8fec50ef39cb4b70f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/810/30/#00-status) SEC content: no ##### [810-30-00-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:05.404Z to 2026-09-10T01:30:05.404Z Record version: sha256:37666f32541db0a08a87e9728976483acb6d075aab150aebbea939b5d8fa90df Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Fair Value (3rd def.)AddedAccounting Standards Update No. 2012-0410/01/2012
810-30-15-3AmendedAccounting Standards Update No. 2015-0202/18/2015
810-30-55-1AmendedAccounting Standards Update No. 2012-0410/01/2012
810-30-55-3AmendedAccounting Standards Update No. 2012-0410/01/2012
Source downloaded (UTC): 2026-09-10T01:30:07.115Z to 2026-09-10T01:30:07.115Z Record version: sha256:18bc632567aac38baffc258ec55fad71131d3e7b7b9c5e5dad9611038b52afc6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/810/30/#05-overview-and-background) SEC content: no ##### [810-30-05-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:07.115Z to 2026-09-10T01:30:07.115Z Record version: sha256:715988aedd2d07b997c634c54488bb582f2349a693b296abb43889c401db74a9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on whether and how a [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") should consolidate a research and development arrangement. The guidance follows one example throughout the Subtopic. For guidance on other issues concerning research and development arrangements, see Subtopic 730-20. ##### [810-30-05-2](https://asc.understandingaccounting.org/asc/810/30/#810-30-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:07.115Z to 2026-09-10T01:30:07.115Z Record version: sha256:4d5147b4b440552af6dfac12c7b599d498092c143dac5a2e28c689d257b0e75d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on what a research and development arrangement is, see Subtopic 730-20. An overview can be found in paragraphs [730-20-05-1 through 05-9](https://asc.understandingaccounting.org/asc/730/20/#730-20-05-1) . Source downloaded (UTC): 2026-09-10T01:30:10.769Z to 2026-09-10T01:30:10.769Z Record version: sha256:9b78aee1262106138690fbd1765d9d94217599e9ae3f86c6bd77df53b8e78ed4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/810/30/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [810-30-15-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:10.769Z to 2026-09-10T01:30:10.769Z Record version: sha256:0ead50164567d17e3b66bedc8a60dc88bd059f018fd7a7d8e3d24728a5fbc4dc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 810-10-15, with specific transaction qualifications and exceptions noted below. #### Transactions ##### [810-30-15-2](https://asc.understandingaccounting.org/asc/810/30/#810-30-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:10.769Z to 2026-09-10T01:30:10.769Z Record version: sha256:2827f935600a9f6b3e755d354a1fd4ba60732ece08579fb239511fc7f7fcdefa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The scope of this Subtopic is limited to those research and development arrangements in which all of the funds for the research and development activities are provided by the [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") of the research and development arrangement. ##### [810-30-15-3](https://asc.understandingaccounting.org/asc/810/30/#810-30-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:10.769Z to 2026-09-10T01:30:10.769Z Record version: sha256:63b9670be12f6f61d566659d17d6dad39883a287fae3f2f83aa06eaa69a7a1b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to either of the following: 1. a Transactions in which the funds are provided by third parties, which would generally be within the scope of Subtopic 730-20. That Subtopic establishes standards of financial accounting and reporting for an entity that is a party to a research and development arrangement through which it can obtain the results of research and development funded partially or entirely by others. 2. b Legal entities required to be consolidated under the guidance on variable interest entities (VIEs). That guidance must be applied first (see the [Variable Interest Entities Subsection](https://asc.understandingaccounting.org/asc/810/10/#15-scope-and-scope-exceptions) of Section 810-10-15) before considering this Subtopic. Consolidation by reporting entities of VIEs, which include many legal entities used in research and development arrangements, is addressed by the Variable Interest Entities Subsections of Subtopic 810-10. #### Other Considerations ##### [810-30-15-4](https://asc.understandingaccounting.org/asc/810/30/#810-30-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:10.769Z to 2026-09-10T01:30:10.769Z Record version: sha256:dfde0734ef89688d077610fc8436c6cbc5b58e9dde4a318e668f4b654d21facf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic provides guidance on consolidation issues; for guidance on other issues concerning research and development arrangements, see Subtopic 730-20. Source downloaded (UTC): 2026-09-10T01:30:16.002Z to 2026-09-10T01:30:16.002Z Record version: sha256:3c3e39dcbda1bf56eb5b79f85d4f65db8d4b1ddf2f594e537829dbc2f6bb778f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/810/30/#25-recognition) SEC content: no ##### [810-30-25-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:16.002Z to 2026-09-10T01:30:16.002Z Record version: sha256:9a64a22a4e0ca4bfdbc5c23483ba81e464c7a517ba24e661f8a37c832fec5c99 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses transactions in which a [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") capitalizes a new entity with cash and rights to certain technology developed by the sponsor, in exchange for Class A and Class B common stock in the new entity. The Class B common shares convey essentially no financial interest to the Sponsor and, other than certain blocking rights, provide the sponsor essentially no voting rights. The sponsor subsequently distributes the Class A common stock to its shareholders subject to a purchase option held by the sponsor. The sponsor then receives funds from the new entity to perform research and development activities. Other potential structures designed to achieve similar objectives also exist. For other types of research and development arrangements, see Subtopic 730-20. ##### [810-30-25-2](https://asc.understandingaccounting.org/asc/810/30/#810-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:16.002Z to 2026-09-10T01:30:16.002Z Record version: sha256:96bf18c1ded17eff273147f00cb5314972bf1c99ba5ebc5798ffebc4071c3e60 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. While a consolidation approach to the sponsor's accounting is not specified, if the incurred research and development costs were allocated to the new entity's Class B common stock held by the sponsor (because the value of the new entity's Class A common stock is derived from the sponsor's purchase option on those shares, not from the sponsor's initial funding of the new entity), the accounting that would result from consolidation would be essentially the same as that required by this Subtopic. ##### [810-30-25-3](https://asc.understandingaccounting.org/asc/810/30/#810-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:16.002Z to 2026-09-10T01:30:16.002Z Record version: sha256:9372552b225507d86029cc439a82f14086aed0f299a1840a9318925ec5d786e5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The sponsor of a research and development arrangement shall account for the research and development arrangement as follows: 1. a Reclassify the cash contributed to the new entity as restricted cash at the time of distribution of the new entity's Class A common stock. 2. b Recognize research and development expense as the research and development activities are performed. 3. c Account for the distribution of the new entity's Class A common stock as a dividend to common stockholders of the sponsor. Source downloaded (UTC): 2026-09-10T01:30:19.483Z to 2026-09-10T01:30:19.483Z Record version: sha256:4f887ebb324269341f1dbb9bb32bce8861103df7446b07856fc0d73a9690e4a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/810/30/#30-initial-measurement) SEC content: no ##### [810-30-30-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:19.483Z to 2026-09-10T01:30:19.483Z Record version: sha256:36a568e0280feaed1094deded13972ca907ea0296d791e37e2cbf7aea3412188 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The amount of the dividend recognized on the distribution of the new research and development arrangement entity's Class A common stock should be based on the fair value of the new entity's Class A common stock and should be recorded at the time the [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") distributes the new entity's Class A common stock to its stockholders. Source downloaded (UTC): 2026-09-10T01:30:23.424Z to 2026-09-10T01:30:23.424Z Record version: sha256:f8a05579669ccba7ba5dfab521ba3a7fbf551c19925d97cc46b7601a636c6bf1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/810/30/#35-subsequent-measurement) SEC content: no ##### [810-30-35-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:23.424Z to 2026-09-10T01:30:23.424Z Record version: sha256:af81cfe69024f186608640e60657b30c88c4a04cd820ac1631f40cf003e309d8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If there is a purchase option, the [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") of a research and development arrangement shall account for the exercise of the option to acquire the new entity's Class A common stock like the acquisition of [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."). That is, the excess of the option exercise price over the carrying amount of the new entity's Class A common stock should be allocated to the assets acquired (generally, in-process or completed research and development) and liabilities assumed (if any). However, if the sponsor does not exercise the purchase option, the new entity's Class A common stock should be reclassified to additional paid-in capital upon expiration of the option as an adjustment to the initial dividend. Example 1 (see paragraph [810-30-55-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-55-1)) provides an illustration of the application of this guidance to a research and development arrangement. Source downloaded (UTC): 2026-09-10T01:30:26.100Z to 2026-09-10T01:30:26.100Z Record version: sha256:4f37505a9121ff6e04f32378128e24e7b4ef0331ddcb0ba736dbda6867e4cbe8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/810/30/#45-other-presentation-matters) SEC content: no #### Presentation of the New Entity's Common Stock by the Sponsor ##### [810-30-45-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:26.100Z to 2026-09-10T01:30:26.100Z Record version: sha256:c459359ad6bf336bba59587c4a99f480db1974aab8ba7644ceb361ad7ef4cc4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The new research and development arrangement entity's Class A common stock shall be presented as [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.") of the [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement."), classified as equity, but separate from the parent's equity. #### EPS ##### [810-30-45-2](https://asc.understandingaccounting.org/asc/810/30/#810-30-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:26.100Z to 2026-09-10T01:30:26.100Z Record version: sha256:f392e1e524339c7ec012707d8db676e74288e057e748cfacddd96d5acc2fdc1f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The research and development expense recognized by the sponsor should not be allocated to the new entity's Class A common stock in determining net income or earnings available to common stockholders of the sponsor in the calculation of earnings per share (EPS). Source downloaded (UTC): 2026-09-10T01:30:29.540Z to 2026-09-10T01:30:29.540Z Record version: sha256:d6a50cb263f696965f2debf896bfd81f9ea7d7d4ecfe82927b22850986315c50 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/810/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [810-30-55-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:29.540Z to 2026-09-10T01:30:29.540Z Record version: sha256:5fd2c270faaa3b3d0e060568979742a5ba92a0d2e0a14b9531fb4a4e35ca3079 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in this Subtopic. A [sponsor](https://asc.understandingaccounting.org/glossary/s/#sponsor "An entity that capitalizes a research and development arrangement.") (the Sponsor) capitalizes a newly created, wholly owned [subsidiary](https://asc.understandingaccounting.org/glossary/s/#subsidiary "An entity, including an unincorporated entity such as a partnership or trust, in which another entity, known as its parent, holds a controlling financial interest. (Also, a variable interest entity that is consolidated by a primary beneficiary.)"), Newco, with $110 million and rights to certain technology developed by the Sponsor (assumed to have no book value) in exchange for Newco Class A common stock and Newco Class B common stock with a nominal [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date."). Concurrent with its formation, the Sponsor and Newco enter into various agreements including a development contract and purchase option (each described in this Example). Shortly thereafter, the Sponsor distributes all of the Newco Class A common stock to the Sponsor's stockholders. The fair value of the Newco Class A common stock at distribution is $80 million. ##### [810-30-55-2](https://asc.understandingaccounting.org/asc/810/30/#810-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:29.540Z to 2026-09-10T01:30:29.540Z Record version: sha256:8bf95791658a3fff85e186706b1fd8db95af1ec52f5ddd5eabd23add0bc0a4fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. After the distribution, the Sponsor owns all of the authorized shares of the Newco Class B common stock. The Newco Class B common stock conveys essentially no financial interest to the Sponsor and, other than certain blocking rights, provides the Sponsor essentially no voting rights. Under the development contract, Newco will be required to spend all of the cash contributed to it by the Sponsor (the available funds) in the research and development of technologies mutually agreed upon with the Sponsor. Newco will have no employees other than its chief executive officer and no facilities other than a nominal amount of office space. (For purposes of this Example, investment income on the available funds, the chief executive officer's salary, and office space rent are ignored.) In addition, Newco will contract with the Sponsor to perform all of Newco's research and development activities under the development contract at the Sponsor's cost plus 10 percent. Newco expects that, in paying for such activities, the available funds will be substantially exhausted within the first two years of its existence. For purposes of this Example, it is assumed that the Sponsor incurs $50 million in research and development costs for each year under the development contract. As a result, Newco pays $55 million to the Sponsor for each year of the development contract. ##### [810-30-55-3](https://asc.understandingaccounting.org/asc/810/30/#810-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:29.540Z to 2026-09-10T01:30:29.540Z Record version: sha256:b4aaa60fee748e071f06c58159c2937b07e0a30fb63dbf42ee80b649aef8f17a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under the purchase option, the Sponsor will have the right to purchase all of the Newco Class A common stock at an exercise price that is intended to approximate the fair value of the shares. The purchase option is exercisable at any time until the second anniversary of the distribution of the Newco Class A common stock. For purposes of this Example, 2 scenarios are assumed under the purchase option—1 in which the option is not exercised and 1 in which the option is exercised for $200 million just before the second anniversary of the distribution of the Newco Class A common stock. ##### [810-30-55-4](https://asc.understandingaccounting.org/asc/810/30/#810-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:29.540Z to 2026-09-10T01:30:29.540Z Record version: sha256:e52b6cac15ec65168624dd8574f953677f5ebc3dd7af22d5326a252e1301db81 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Under Newco's certificate of incorporation, Newco is prohibited from taking or permitting any action inconsistent with, or that will in any way alter, the Sponsor's rights under the purchase option without the preapproval of the Sponsor. In addition, until the expiration of the purchase option, Newco may not merge, liquidate, or sell any substantial portion of its assets or amend its certificate of incorporation to alter the purchase option, Newco's authorized capitalization, or the provisions of the certificate of incorporation governing Newco's board of directors without the preapproval of the Sponsor. The journal entries to account for the research and development arrangement are presented in the following table. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-EC7C6DAE-E065-4441-B8E7-99325F7461B2-low.gif) Impact at Consolidated Sponsor Level Distribution of Newco's Class A Common Stock Restricted Cash " $110,000,000 " Cash " $110,000,000 " Common Dividend " 80,000,000 " Newco Class A Common Stock (a) " 80,000,000 " Year 1 Research and Development Research and Development Costs Incurred by the Sponsor Research and Development Expense " $50,000,000 " Cash " $50,000,000 " Reimbursement under Development Contract Cash " $55,000,000 " Restricted Cash " $55,000,000 " Year 2 Research and Development Research and Development Costs Incurred by the Sponsor Research and Development Expense " $50,000,000 " Cash " $50,000,000 " Reimbursement under Development Contract Cash " $55,000,000 " Restricted Cash " $55,000,000 " Purchase Option (Two Scenarios) Scenario 1—Option Not Exercised Newco Class A Common Stock " $80,000,000 " Additional Paid-in Capital " $80,000,000 " Scenario 2—Option Exercised In-Process or Completed Research and Development " $120,000,000 " Newco Class A Common Stock " 80,000,000 " Cash " $200,000,000 " Impact of All the Entries Scenario 1—Option Not Exercised Common Dividends " $80,000,000 " Research and Development Expense " 100,000,000 " Additional Paid-in Capital " $80,000,000 " Cash " 100,000,000 " Scenario 2—Option Exercised Common Dividends " $80,000,000 " Research and Development Expense " 100,000,000 " In-Process or Completed Research and Development " 120,000,000 " Cash " $300,000,000 " (a) Accounted for like noncontrolling interest. Source downloaded (UTC): 2026-09-10T01:30:33.354Z to 2026-09-10T01:30:33.354Z Record version: sha256:46dec4a8d012e68204e0e2b0d20cd7ae58c6ba113d4b5bae59e34531e049b42e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 810-30-60: 60 Relationships [Read section](https://asc.understandingaccounting.org/asc/810/30/#60-relationships) SEC content: no #### Collaborative Arrangements ##### [810-30-60-1](https://asc.understandingaccounting.org/asc/810/30/#810-30-60-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:30:33.354Z to 2026-09-10T01:30:33.354Z Record version: sha256:e9c539298f1613d350025a0c9bcf2084bcd67704711d27f271c73618aee96ace Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For guidance on research and development arrangements conducted as collaborative arrangements, see Topic 808.