# ASC 825-20-55: Financial Instruments — Registration Payment Arrangements — 55 Implementation Guidance and Illustrations Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/825/20/#55-implementation-guidance-and-illustrations) 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): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:1b867e44b40ba45eb343c1081cbf32bb3a3da0f738c651a7acc8fe63e245fb05 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 825-20-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/825/20/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [825-20-55-1](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:6058296fccffe760dc11bd4a0449408b323eec3cb12c8350de1a47e9b4ca8bfa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the application of this Subtopic to a [registration payment arrangement](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).") 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). ##### [825-20-55-2](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:117929bd5aaff8cd5d0d2b75d493773f44e83646d5a71ba599a23c06b12d34b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-3](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:b64b96926b641ac52e5d0ca3e8b7b12de78c7f3a0ea9dbd0dd7b9237a948dcae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-4](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:29187fb13c3421329917e846a4d66c988f22f7cd2f4cf2a2bb5e059b9c00c29d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-5](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:5171081b6dfc53cb76583721eacdfe550cdb75c1c6100d35686142b1bda97b58 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-6](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:4621d3c4d3e463428f1655b8af00d7f4d9ce768ee83ad7a42c700a7dfa66d006 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-7](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:3f1ecad9a81a1a7783440f6e527cc9e23aa1faadf11fc89d9d31599fc4dbe011 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-8](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:a6e02da1c21b7f382503c0e36b1751220f164a0d4f971384e136ad755c97b775 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-9](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:83f63336dd2493c1ea704a147038812fadcfd647b6e13bb17292314ca9bd6913 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the application of this Subtopic to debt issued subject to a registration payment arrangement within the scope of this Subtopic. ##### [825-20-55-10](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:2d7550c54aa64f064eabde491b26eb83b22867973134468145c71b7a24f01a78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-11](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:dc59fcd2d0bfdb313cfa4b3a17208cc41b8d444a34924121dca56630235f6bb2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-12](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:8f7648afee499907be74f8166d0947a09bf96d42c1eadc16474800eeecf822f9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-13](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:5fddf7354946242b6699a5b2a2406f77c7f9dd64af2b09d44a5a6b72c376bc40 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [825-20-55-14](https://asc.understandingaccounting.org/asc/825/20/#825-20-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:45:06.511Z to 2026-09-10T01:45:06.511Z Record version: sha256:cb1d3045ed7eacad965147442bb7b0cb78e3df9ab9505e7efdd6a7e70453ab7a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.