{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/825/20/#55-implementation-guidance-and-illustrations","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":"825-20","subtopic_title":"Registration Payment Arrangements","section":{"number":"55","label":"55 Implementation Guidance and Illustrations","anchor":"55-implementation-guidance-and-illustrations","is_sec":false,"groups":[{"block":null,"heading":"Illustrations","paragraphs":[{"citation":"825-20-55-1","para":"55-1","html":"
The following Cases illustrate the application of this Subtopic to a registration payment arrangement within the scope of this Subtopic:
  1. a
    Transfer of consideration is not probable at inception (Case A).
  2. b
    Transfer of consideration is probable at inception (Case B).
","snippet":"The following Cases illustrate the application of this Subtopic to a registration payment arrangement within the scope of this Subtopic:\n(a) Transfer of consideration is not probable at inception (Case A).\n(b) Transfer o…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6058296fccffe760dc11bd4a0449408b323eec3cb12c8350de1a47e9b4ca8bfa","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-2","para":"55-2","html":"
Cases A and B share all of the following assumptions:
  1. a
    Entity A issues 10 million shares of common stock and 2 million freestanding warrants to purchase additional shares of common stock for total proceeds of $100 million in a private placement transaction.
  2. b
    In connection with the offering, Entity A enters into a registration payment arrangement that requires Entity A to use its best efforts to do both of the following:
    1. 1
      File a registration statement with the Securities and Exchange Commission (SEC) for the resale of 12 million shares of common stock. That registration statement must be declared effective within 180 days of the offering's closing date
    2. 2
      Once the registration statement is effective, maintain its effectiveness for three years.
  3. c
    If the registration statement is not declared effective within 180 days, or if it ceases to be effective during the 3-year period in which Entity A is required to maintain its effectiveness, the investors are entitled to liquidated damages in the form of monthly cash payments computed as 1.5 percent per month of the $100 million total offering proceeds.
","snippet":"Cases A and B share all of the following assumptions:\n(a) Entity A issues 10 million shares of common stock and 2 million freestanding warrants to purchase additional shares of common stock for total proceeds of $100 mil…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:117929bd5aaff8cd5d0d2b75d493773f44e83646d5a71ba599a23c06b12d34b1","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-3","para":"55-3","html":"
At closing, Entity A concludes that it is not probable that it will be required to remit any payments to the investors for failing to obtain an effective registration statement or failing to maintain its effectiveness.
","snippet":"At closing, Entity A concludes that it is not probable that it will be required to remit any payments to the investors for failing to obtain an effective registration statement or failing to maintain its effectiveness.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b64b96926b641ac52e5d0ca3e8b7b12de78c7f3a0ea9dbd0dd7b9237a948dcae","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-4","para":"55-4","html":"
Entity A files a registration statement for the resale of the shares that is declared effective within the 180-day grace period. One year after the effective date of the registration statement, circumstances have changed such that Entity A concludes that it is probable that the effectiveness of the registration statement will not be maintained for some portion of the remaining two-year period. Although Entity A is unable to estimate the exact amount of time that the registration statement will cease to be effective, its reasonable estimate at the reporting date is a period of time ranging between 9 and 18 months. Accordingly, the range of loss is between $13.5 million ($100 million × 1.5 percent × 9 months) and $27 million ($100 million × 1.5 percent × 18 months). At the reporting date, no amount within that range appears to be a better estimate than any other amount.
","snippet":"Entity A files a registration statement for the resale of the shares that is declared effective within the 180-day grace period. One year after the effective date of the registration statement, circumstances have changed…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:29187fb13c3421329917e846a4d66c988f22f7cd2f4cf2a2bb5e059b9c00c29d","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-5","para":"55-5","html":"
The common stock and warrants subject to the registration payment arrangement must be recognized and measured in accordance with other applicable generally accepted accounting principles (GAAP) without regard to the contingent obligation to make payments pursuant to the registration payment arrangement. Therefore, that contingent obligation does not affect Entity A's analysis of whether the warrants are classified as liabilities or equity instruments under Subtopic 815-40, regardless of whether the transfer of consideration under the registration payment arrangement is probable. In the period in which it became probable that Entity A will be required to remit payments to the investors for failing to maintain an effective registration statement and a range of payments can be reasonably estimated, a contingent liability should be accrued by a charge to earnings. Because no amount within the range of payments is a better estimate than any other amount, the $13.5 million minimum amount in the range should be accrued.
","snippet":"The common stock and warrants subject to the registration payment arrangement must be recognized and measured in accordance with other applicable generally accepted accounting principles (GAAP) without regard to the cont…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5171081b6dfc53cb76583721eacdfe550cdb75c1c6100d35686142b1bda97b58","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-6","para":"55-6","html":"
In this Case, at closing, Entity A concludes that it is probable that it will be required to remit payments to the investors for failing to obtain an effective registration statement within the 180-day grace period.
","snippet":"In this Case, at closing, Entity A concludes that it is probable that it will be required to remit payments to the investors for failing to obtain an effective registration statement within the 180-day grace period.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4621d3c4d3e463428f1655b8af00d7f4d9ce768ee83ad7a42c700a7dfa66d006","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-7","para":"55-7","html":"
Based on the relevant facts and circumstances, Entity A can reasonably estimate both of the following:
  1. a
    The registration statement will become effective six months after the grace period expires.
  2. b
    Once effective, registration will be maintained for the three-year required period of effectiveness.
","snippet":"Based on the relevant facts and circumstances, Entity A can reasonably estimate both of the following:\n(a) The registration statement will become effective six months after the grace period expires.\n(b) Once effective, r…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3f1ecad9a81a1a7783440f6e527cc9e23aa1faadf11fc89d9d31599fc4dbe011","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-8","para":"55-8","html":"
The common stock and warrants subject to the registration payment arrangement must be recognized and measured in accordance with other applicable GAAP without regard to the contingent obligation to make payments pursuant to the registration payment arrangement. Therefore, that contingent obligation does not affect Entity A's analysis of whether the warrants are classified as liabilities or equity instruments under Subtopic 815-40, regardless of whether the transfer of consideration under the registration payment arrangement is probable. Because a transfer of consideration under the registration payment arrangement is probable and can be reasonably estimated at inception, the $9 million ($100 million × 1.5 percent × 6 months) contingent liability under the registration payment arrangement must be included in the allocation of proceeds from the offering. The $91 million of remaining proceeds should be allocated between the common stock and warrants based on the guidance in other applicable GAAP.
","snippet":"The common stock and warrants subject to the registration payment arrangement must be recognized and measured in accordance with other applicable GAAP without regard to the contingent obligation to make payments pursuant…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a6e02da1c21b7f382503c0e36b1751220f164a0d4f971384e136ad755c97b775","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-9","para":"55-9","html":"
This Example illustrates the application of this Subtopic to debt issued subject to a registration payment arrangement within the scope of this Subtopic.
","snippet":"This Example illustrates the application of this Subtopic to debt issued subject to a registration payment arrangement within the scope of this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:83f63336dd2493c1ea704a147038812fadcfd647b6e13bb17292314ca9bd6913","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-10","para":"55-10","html":"
Entity A issues notes with an aggregate principal amount of $100 million in a private placement transaction. The notes were issued at par, bear interest at 8 percent per annum, and are not convertible into equity shares of the issuer.
","snippet":"Entity A issues notes with an aggregate principal amount of $100 million in a private placement transaction. The notes were issued at par, bear interest at 8 percent per annum, and are not convertible into equity shares …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2d7550c54aa64f064eabde491b26eb83b22867973134468145c71b7a24f01a78","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-11","para":"55-11","html":"
In connection with the offering, Entity A enters into a registration payment arrangement that requires Entity A to use its best efforts to do both of the following:
  1. a
    File a registration statement with the SEC for the resale of the notes. That registration statement must be declared effective within 180 days of the offering's closing date
  2. b
    Once the registration statement is effective, maintain its effectiveness for two years.
","snippet":"In connection with the offering, Entity A enters into a registration payment arrangement that requires Entity A to use its best efforts to do both of the following:\n(a) File a registration statement with the SEC for the …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:dc59fcd2d0bfdb313cfa4b3a17208cc41b8d444a34924121dca56630235f6bb2","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-12","para":"55-12","html":"
If the registration statement is not declared effective within 180 days, or if it ceases to be effective during the 2-year period in which Entity A is required to maintain its effectiveness, the investors are entitled to liquidated damages in the form of an increase to the interest coupon of 50 basis points per month. At closing, Entity A concludes that it is not probable that it will be required to remit any payments to the investors for failing to obtain an effective registration statement or failing to maintain its effectiveness.
","snippet":"If the registration statement is not declared effective within 180 days, or if it ceases to be effective during the 2-year period in which Entity A is required to maintain its effectiveness, the investors are entitled to…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:8f7648afee499907be74f8166d0947a09bf96d42c1eadc16474800eeecf822f9","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-13","para":"55-13","html":"
Entity A files a registration statement for the resale of the notes that is declared effective within the 180-day grace period. One year after the effective date of the registration statement, circumstances have changed such that Entity A concludes that it is probable that the effectiveness of the registration statement will not be maintained for some portion of the remaining one-year period. Although Entity A is unable to estimate the exact amount of time that the registration statement will cease to be effective, its reasonable estimate at the reporting date is a period of time ranging between three and six months. Accordingly, the range of loss is between $1.5 million ($100 million × 0.5 percent × 3 months) and $3 million ($100 million × 0.5 percent × 6 months). At the reporting date, no amount within that range appears to be a better estimate than any other amount.
","snippet":"Entity A files a registration statement for the resale of the notes that is declared effective within the 180-day grace period. One year after the effective date of the registration statement, circumstances have changed …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5fddf7354946242b6699a5b2a2406f77c7f9dd64af2b09d44a5a6b72c376bc40","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},{"citation":"825-20-55-14","para":"55-14","html":"
In the period in which it became probable that Entity A will be required to remit payments to the investors for failing to maintain an effective registration statement and a range of payments can be reasonably estimated, a contingent liability should be accrued by a charge to earnings. Because no amount within the range of payments is a better estimate than any other amount, the $1.5 million minimum amount in the range should be accrued.
","snippet":"In the period in which it became probable that Entity A will be required to remit payments to the investors for failing to maintain an effective registration statement and a range of payments can be reasonably estimated,…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:cb1d3045ed7eacad965147442bb7b0cb78e3df9ab9505e7efdd6a7e70453ab7a","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:2e28e30133e41c2906f309933565c123fad3896531e1da3917b619c8cd00c271","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b867e44b40ba45eb343c1081cbf32bb3a3da0f738c651a7acc8fe63e245fb05","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1b867e44b40ba45eb343c1081cbf32bb3a3da0f738c651a7acc8fe63e245fb05","downloaded_from":"2026-09-10T01:45:06.511Z","last_downloaded_at":"2026-09-10T01:45:06.511Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482779","source_sha256":"f6698136780bcdce44ccca931fdea8e10d32cd6d6b1e0a7f913afa398a4ca418"}}