{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/825/10/#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":"825","topic_title":"Financial Instruments","subtopic":"825-10","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":"825-10-05-1","para":"05-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">The Financial Instruments Topic provides guidance on matters related broadly to all <a href=\"/glossary/f/#financial-instrument\" class=\"term\" title=\"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.\"><span>financial instruments</span></a>. This Topic includes the following Subtopics:<ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\">Overall</div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\"><a href=\"/glossary/r/#registration-payment-arrangement\" class=\"term\" title=\"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).\"><span>Registration Payment Arrangements</span></a>.</div></li></ol></div></div>","snippet":"The Financial Instruments Topic provides guidance on matters related broadly to all financial instruments. This Topic includes the following Subtopics:\n(a) Overall\n(b) Registration Payment Arrangements.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5acae71f8fbc9ffccd02326d3687d032e3ac6062bd380c048f7203a6dc2d37e4","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}},{"citation":"825-10-05-2","para":"05-2","html":"<div class=\"asc-body\"><div class=\"norm-text\">The Overall Subtopic presents guidance in the following Subsections:<ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\">General</div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\">Fair Value Option.</div></li></ol>The General Subsections provide guidance on the fair value option and certain disclosures about financial instruments.</div></div>","snippet":"The Overall Subtopic presents guidance in the following Subsections:\n(a) General\n(b) Fair Value Option.\nThe General Subsections provide guidance on the fair value option and certain disclosures about financial instrument…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e083139073b3d18194cd618f67634302db1e844f245bd223855b3a32bf021d14","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}},{"citation":"825-10-05-3","para":"05-3","html":"<div class=\"asc-body\"><div class=\"norm-text\">The Codification contains various Topics, and in some cases individual Subtopics, that provide (but are not necessarily limited to) guidance on accounting for different financial instruments, including <a href=\"/glossary/f/#financial-asset\" class=\"term\" title=\"Cash, evidence of an ownership interest in an entity, or a contract that conveys to one entity a right to do either of the following: Receive cash or another financial instrument from a second entity Exchange other financial instruments on potentially favorable terms with the second entity.\"><span>financial assets</span></a>, <a href=\"/glossary/f/#financial-liability\" class=\"term\" title=\"A contract that imposes on one entity an obligation to do either of the following:Deliver cash or another financial instrument to a second entity Exchange other financial instruments on potentially unfavorable terms with the second entity.\"><span>financial liabilities</span></a>, and equity. Those Topics and Subtopics include, among others, all of the following:<ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\">Cash and Cash Equivalents </div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\">Receivables</div></li><li class=\"li-norm\"><span class=\"linum\">c</span><div class=\"p\">Investments—Debt Securities</div></li><li class=\"li-norm\"><span class=\"linum\">cc</span><div class=\"p\"><span class=\"sfragment\" id=\"sfr_CCF3DD75-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Investments—Equity Securities</span></span></div></li><li class=\"li-norm\"><span class=\"linum\">d</span><div class=\"p\">Investments—Equity Method and Joint Ventures</div></li><li class=\"li-norm\"><span class=\"linum\">e</span><div class=\"p\">Liabilities</div></li><li class=\"li-norm\"><span class=\"linum\">f</span><div class=\"p\">Commitments</div></li><li class=\"li-norm\"><span class=\"linum\">g</span><div class=\"p\">Contingencies</div></li><li class=\"li-norm\"><span class=\"linum\">h</span><div class=\"p\">Guarantees</div></li><li class=\"li-norm\"><span class=\"linum\">i</span><div class=\"p\">Debt</div></li><li class=\"li-norm\"><span class=\"linum\">j</span><div class=\"p\">Distinguishing Liabilities from Equity</div></li><li class=\"li-norm\"><span class=\"linum\">k</span><div class=\"p\">Equity</div></li><li class=\"li-norm\"><span class=\"linum\">l</span><div class=\"p\">Derivatives and Hedging</div></li><li class=\"li-norm\"><span class=\"linum\">m</span><div class=\"p\">Leases</div></li><li class=\"li-norm\"><span class=\"linum\">n</span><div class=\"p\">Transfers and Servicing</div></li><li class=\"li-norm\"><span class=\"linum\">o</span><div class=\"p\">Each of the Financial Services Industry Topics.</div></li></ol></div></div>","snippet":"The Codification contains various Topics, and in some cases individual Subtopics, that provide (but are not necessarily limited to) guidance on accounting for different financial instruments, including financial assets, …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:78a6e75c23ea79d838d5725a2d0f40253e371cdbc24e8076cf8d8db3f9162238","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}},{"citation":"825-10-05-4","para":"05-4","html":"<div class=\"asc-body\"><div class=\"norm-text\">Various Topics in the Codification provide guidance that applies without regard to whether the instrument is, or transaction involves, a financial instrument.</div></div>","snippet":"Various Topics in the Codification provide guidance that applies without regard to whether the instrument is, or transaction involves, a financial instrument.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c63ed81a5f24222b797c7b649b314e86bd0ef7e44132b9cfa4c30964a13d1743","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9e91d3b4abb41dc531f248f72423288509a5167d9f5c090d0b3312baca25044d","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}},{"block":"Fair Value Option","heading":null,"paragraphs":[{"citation":"825-10-05-5","para":"05-5","html":"<div class=\"asc-body\"><div class=\"norm-text\">The Fair Value Option Subsections of this Subtopic address both of the following:<ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\"><span class=\"sfragment\" id=\"sfr_CCFC50F7-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Circumstances in which entities may choose, at specified election dates, to measure eligible items at <a href=\"/glossary/f/#fair-value\" class=\"term\" title=\"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.\"><span>fair value</span></a> (the fair value option) </span></span></div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\"><span class=\"sfragment\" id=\"sfr_CCFC526F-6E92-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. </span></span></div></li></ol></div></div>","snippet":"The Fair Value Option Subsections of this Subtopic address both of the following:\n(a) Circumstances in which entities may choose, at specified election dates, to measure eligible items at fair value (the fair value optio…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5a9e37aa3810402a73438e87e933ae77482eb17286e010e61e050c4e12217be1","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482884","source_sha256":"aa6f9cd2d21e2d624ecd7a2662341d792dfcb3e6f81fab93ef0920ac7305ccd3"}},{"citation":"825-10-05-6","para":"05-6","html":"<div class=\"asc-body\"><div class=\"norm-text\">See Topic <a altsource=\"GUID-0C8D9651-1182-4A36-827F-0C71E4C9D9F4.ditamap\" class=\"ditamap\">820</a> for guidance on fair value measurements.</div></div>","snippet":"See Topic 820 for guidance on fair value measurements.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de6248d86d5e21cf69af950799e962d5624c96fa43af4ffadcd68983fe186a1a","downloaded_from":"2026-09-10T01:44:14.996Z","last_downloaded_at":"2026-09-10T01:44:14.996Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval 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