# ASC 825-10-15: Financial Instruments — Overall — 15 Scope and Scope Exceptions Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/825/10/#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): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:8067e2a6be50cff614c7092561180325344bb962848ed71b4d534b40397e938a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 825-10-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/825/10/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [825-10-15-1](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:74e94537b99c383f23bcf892e14f9c9f5ecd70e813f9a5217153294d1fb7d2e9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The General Subsection of this Section establishes the pervasive scope for this Subtopic, with specific exceptions noted in the other Subsections of this Section. #### Entities ##### [825-10-15-2](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:6ce100d86a104d9c2ea45106f0c8e0f3f7a5a2b03f2c5da9f780ef3f04ab5f57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to all entities. ### Fair Value Option #### Overall Guidance ##### [825-10-15-3](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:e124690ebef30a2293a6e721e43d192236730c8465700d4560a9cd43a95a4ca6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Fair Value Option Subsections follow the same Scope and Scope Exceptions as outlined in the General Subsection of this Subtopic, with specific qualifications and exceptions noted below. #### Instruments ##### [825-10-15-4](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:62ea12e62503eece4380a0929b0c6f2508efded1203cb6afec110739eed0917e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All entities may elect the [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.") option for any of the following eligible items: 1. a A recognized [financial asset](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.") and [financial liability](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."), except any listed in the following paragraph 2. b A [firm commitment](https://asc.understandingaccounting.org/glossary/f/#firm-commitment "An agreement with an unrelated party, binding on both parties and usually legally enforceable, with the following characteristics:The agreement specifies all significant terms, including the quantity to be exchanged, the fixed price, and the timing of the transaction. The fixed price may be expressed as a specified amount of an entity's functional currency or of a foreign currency. It may also be expressed as a specified interest rate or specified effective yield. The binding provisions of an agreement are regarded to include those legal rights and obligations codified in the laws to which such an agreement is subject. A price that varies with the market price of the item that is the subject of the firm commitment cannot qualify as a fixed price. For example, a price that is specified in terms of ounces of gold would not be a fixed price if the market price of the item to be purchased or sold under the firm commitment varied with the price of gold. The agreement includes a disincentive for nonperformance that is sufficiently large to make performance probable. In the legal jurisdiction that governs the agreement, the existence of statutory rights to pursue remedies for default equivalent to the damages suffered by the nondefaulting party, in and of itself, represents a sufficiently large disincentive for nonperformance to make performance probable for purposes of applying the definition of a firm commitment.") that would otherwise not be recognized at inception and that involves only financial instruments (for example, a forward purchase contract for a loan that is not readily convertible to cash—that commitment involves only financial instruments—a loan and cash—and would not otherwise be recognized because it is not a derivative instrument) 3. c A written loan commitment 4. d The rights and obligations under an insurance contract that has both of the following characteristics: 1. 1 The insurance contract is not 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.") (because it requires or permits the insurer to provide goods or services rather than a cash settlement). 2. 2 The insurance contract's terms permit the insurer to settle by paying a third party to provide those goods or services. 5. e The rights and obligations under a warranty that has both of the following characteristics: 1. 1 The warranty is not a financial instrument (because it requires or permits the warrantor to provide goods or services rather than a cash settlement). 2. 2 The warranty's terms permit the warrantor to settle by paying a third party to provide those goods or services. 6. f A host financial instrument resulting from the separation of an embedded nonfinancial derivative from a nonfinancial hybrid instrument under paragraph [815-15-25-1](https://asc.understandingaccounting.org/asc/815/15/#815-15-25-1), subject to the scope exceptions in the following paragraph (for example, an instrument in which the value of the bifurcated embedded derivative is payable in cash, services, or merchandise but the debt host is payable only in cash). ##### [825-10-15-5](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-5) Pending content: yes Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:94dc51ee3fbefeb9cf6dc0a064ed07eb71fe4d642329d74233a02d092305334d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No entity may elect the fair value option for any of the following financial assets and financial liabilities: 1. a An investment in a subsidiary that the entity is required to consolidate. 2. b An interest in a variable interest entity (VIE) that the entity is required to consolidate. 3. c Employers' and plans' obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), postemployment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements, as defined in Topics 420; 710; 712; 715; 718; and 960. 4. d Financial assets and financial liabilities recognized under leases as defined in Subtopic 842-10. (This exception does not apply to a guarantee of a third-party lease obligation or a contingent obligation arising from a cancelled lease.) 5. e Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions. 6. f Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholders' equity (including temporary equity). Transition date:(P) December 16, 2027; (N) December 16, 2028Transition guidance: [818-10-65-1](https://asc.understandingaccounting.org/asc/818/10/#818-10-65-1)No entity may elect the fair value option for any of the following financial assets and financial liabilities: 1. a An investment in a subsidiary that the entity is required to consolidate. 2. b An interest in a variable interest entity (VIE) that the entity is required to consolidate. 3. c Employers' and plans' obligations (or assets representing net overfunded positions) for pension benefits, other postretirement benefits (including health care and life insurance benefits), postemployment benefits, employee stock option and stock purchase plans, and other forms of deferred compensation arrangements, as defined in Topics 420; 710; 712; 715; 718; and 960. 4. d Financial assets and financial liabilities recognized under leases as defined in Subtopic 842-10. (This exception does not apply to a guarantee of a third-party lease obligation or a contingent obligation arising from a cancelled lease.) 5. e Deposit liabilities, withdrawable on demand, of banks, savings and loan associations, credit unions, and other similar depository institutions. 6. f Financial instruments that are, in whole or in part, classified by the issuer as a component of shareholders' equity (including temporary equity). 7. g [Environmental credit obligation](https://asc.understandingaccounting.org/glossary/e/#environmental-credit-obligation "(P) December 16, 2027; (N) December 16, 2028818-10-65-1A regulatory compliance obligation arising from existing or enacted laws, statutes, or ordinances represented to prevent, control, reduce, or remove emissions or other pollution that may be settled with environmental credits. Obligations within the scope of Subtopic 410-30 are not environmental credit obligations.") liabilities that can be settled in cash that are accounted for in accordance with Topic 818. #### Other Considerations ##### [825-10-15-6](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:4bcf5856cbaee543b2ca3d8ea827a0aa38b450f9148b6c8a0f9b21d44a6fd368 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The Fair Value Option Subsections: 1. a Do not affect any existing accounting literature that requires certain assets and liabilities to be carried at fair value 2. b Do not establish requirements for recognizing and measuring dividend income, interest income, or interest expense 3. c Do not eliminate disclosure requirements included in other Subtopics, including requirements for disclosures about fair value measurements included in Topic 820. ##### [825-10-15-7](https://asc.understandingaccounting.org/asc/825/10/#825-10-15-7) Pending content: yes Source downloaded (UTC): 2026-09-10T01:44:19.031Z to 2026-09-10T01:44:19.031Z Record version: sha256:a2b8fc332647580b756ddc5a99fe32a68450126a657f742ffbbf1359df202cdf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Not-for-profit entities (NFPs) shall apply the provisions of the Fair Value Option Subsections with the following modifications: 1. a References to an income statement shall be replaced with references to a statement of activities, statement of changes in net assets, or statement of operations. 2. b References to earnings shall be replaced with references to changes in net assets, except as indicated in (c). 3. c Paragraph [954-825-45-1](https://asc.understandingaccounting.org/asc/825/954/#825-954-45-1) explains that health care entities subject to Topic 954 shall report unrealized gains and losses on items for which the fair value option has been elected within the performance indicator or as a part of discontinued operations, as appropriate. Unlike other NFPs, health care entities subject to that Topic present performance indicators analogous to income from continuing operations. Consistent with the provisions of Subtopic 958-10, NFPs may present such gains and losses either within or outside of other intermediate measures of operations unless such gains or losses are part of discontinued operations. This includes intermediate measures of operations presented by NFPs other than health care entities and any additional intermediate measures of operations presented within the performance indicator by not-for-profit health care entities. 4. d The disclosure requirements in paragraph [825-10-50-30](https://asc.understandingaccounting.org/asc/825/10/#825-10-50-30) shall apply not only with respect to the effect on performance indicators or other intermediate measures of operations, if presented, but also with respect to the effect on the change in each of the net asset classes (without donor restrictions or with donor restrictions), as applicable. Transition date:(P) December 16, 2026; (N) December 16, 2026Transition guidance: [105-10-65-10](https://asc.understandingaccounting.org/asc/105/10/#105-10-65-10)Not-for-profit entities (NFPs) shall apply the provisions of the Fair Value Option Subsections with the following modifications: 1. a References to an income statement shall be replaced with references to a statement of activities, statement of changes in net assets, or statement of operations. 2. b References to earnings shall be replaced with references to changes in net assets, except as indicated in (c). 3. c Paragraph [954-825-45-1](https://asc.understandingaccounting.org/asc/825/954/#825-954-45-1) explains that health care entities subject to Topic 954 shall report unrealized gains and losses on items for which the fair value option has been elected within the performance indicator or as a part of discontinued operations, as appropriate. Unlike other NFPs, health care entities subject to that Topic present performance indicators analogous to income from continuing operations. Consistent with the provisions of paragraphs [958-220-45-9 through 45-12](https://asc.understandingaccounting.org/asc/220/958/#220-958-45-9) , NFPs may present such gains and losses either within or outside of other intermediate measures of operations unless such gains or losses are part of discontinued operations. This includes intermediate measures of operations presented by NFPs other than health care entities and any additional intermediate measures of operations presented within the performance indicator by not-for-profit health care entities. 4. d The disclosure requirements in paragraph [825-10-50-30](https://asc.understandingaccounting.org/asc/825/10/#825-10-50-30) shall apply not only with respect to the effect on performance indicators or other intermediate measures of operations, if presented, but also with respect to the effect on the change in each of the net asset classes (without donor restrictions or with donor restrictions), as applicable.