# ASC 825-10-05: Financial Instruments — Overall — 05 Overview and Background Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/825/10/#05-overview-and-background) 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): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:81dc44b5be077d4006b66f478db02cbb973b4a8e4b08df6d7c6d94126815193c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 825-10-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/825/10/#05-overview-and-background) SEC content: no ##### [825-10-05-1](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:5acae71f8fbc9ffccd02326d3687d032e3ac6062bd380c048f7203a6dc2d37e4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Financial Instruments Topic provides guidance on matters related broadly to all [financial instruments](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."). This Topic includes the following Subtopics: 1. a Overall 2. b [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)."). ##### [825-10-05-2](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:e083139073b3d18194cd618f67634302db1e844f245bd223855b3a32bf021d14 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Overall Subtopic presents guidance in the following Subsections: 1. a General 2. b Fair Value Option. The General Subsections provide guidance on the fair value option and certain disclosures about financial instruments. ##### [825-10-05-3](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:78a6e75c23ea79d838d5725a2d0f40253e371cdbc24e8076cf8d8db3f9162238 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/glossary/f/#financial-asset "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."), [financial liabilities](https://asc.understandingaccounting.org/glossary/f/#financial-liability "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."), and equity. Those Topics and Subtopics include, among others, all of the following: 1. a Cash and Cash Equivalents 2. b Receivables 3. c Investments—Debt Securities 4. cc Investments—Equity Securities 5. d Investments—Equity Method and Joint Ventures 6. e Liabilities 7. f Commitments 8. g Contingencies 9. h Guarantees 10. i Debt 11. j Distinguishing Liabilities from Equity 12. k Equity 13. l Derivatives and Hedging 14. m Leases 15. n Transfers and Servicing 16. o Each of the Financial Services Industry Topics. ##### [825-10-05-4](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:c63ed81a5f24222b797c7b649b314e86bd0ef7e44132b9cfa4c30964a13d1743 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Various Topics in the Codification provide guidance that applies without regard to whether the instrument is, or transaction involves, a financial instrument. ### Fair Value Option ##### [825-10-05-5](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:5a9e37aa3810402a73438e87e933ae77482eb17286e010e61e050c4e12217be1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Fair Value Option Subsections of this Subtopic address both of the following: 1. a Circumstances in which entities may choose, at specified election dates, to measure eligible items at [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.") (the fair value option) 2. b Presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. ##### [825-10-05-6](https://asc.understandingaccounting.org/asc/825/10/#825-10-05-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:14.996Z to 2026-09-10T01:44:14.996Z Record version: sha256:de6248d86d5e21cf69af950799e962d5624c96fa43af4ffadcd68983fe186a1a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Topic 820 for guidance on fair value measurements.