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The disclosure requirements of ASC 470 vary depending on the nature of the debt. Regulation S-X also prescribes certain disclosure requirements for the debt of SEC registrants.

12.12.1 Long-term debt

The guidance in ASC 470-10-50-1 through ASC 470-10-50-5 provides the following general disclosure requirements for all long-term borrowings:
  • The combined aggregate amount of maturities and sinking fund requirements for each of the five years following the date of the latest balance sheet
  • The circumstances surrounding any debt obligations that have a covenant violation at the balance sheet date and are classified as noncurrent
  • Subjective acceleration clauses required to be disclosed under ASC 470-10-45-2 (discussed in FSP 12.3.2.2)
  • If a short-term obligation is excluded from current liabilities (as discussed in FSP 12.3.4), a general description of the financing agreement and the terms of any new obligation incurred, or expected to be incurred, or equity securities issued, or expected to be issued as part of the refinancing
  • Explanation of the pertinent rights and privileges of various securities outstanding, including, but not limited to:
    • Information regarding participation rights
    • Call price and dates
    • Conversion exercise prices or rates and pertinent dates
    • Number of shares issued upon conversion, exercise, or satisfaction of required conditions during at least the most recent annual period and any subsequent interim period presented
Example 3 in ASC 470-10-55-10 through ASC 470-10-55-12 provides an example disclosure for a long-term borrowing.
Regulation S-X Rule 5-02 and Regulation S-X Rule 4-08 provide the following incremental disclosure requirements for long-term debt for public reporting entities. An SEC registrant is required to disclose the following separately on the balance sheet or in a footnote for each issue or type of debt (including capital leases).
  • The general character of each type of debt including the rate of interest
  • The date of maturity or maturities (if maturing serially)
  • If the payment of principal or interest is contingent, an appropriate indication of such contingency
  • A brief indication of priority
  • If convertible, the basis
  • The amount and terms (including commitment fees and the conditions under which commitments may be withdrawn) of unused commitments for long-term financing
  • Any significant changes in the authorized or issued amounts of debt since the date of the latest balance sheet filed for the reporting entity
  • The facts and amounts concerning any default in principal, interest, sinking fund, or redemption provisions with respect to any issue of securities or credit agreements or any covenant violation of a debt agreement, which default or violation existed at the date of the most recent balance sheet being filed, and which has not been subsequently cured. If a default or violation exists but acceleration of the obligation has been waived for a stated period of time beyond the date of the most recent balance sheet being filed, state the amount of the obligation and the period of the waiver.
In addition, since the nature of these incremental disclosure requirements appears to be consistent with the disclosure of "pertinent rights and privileges" discussed in ASC 470, private companies may also want to consider disclosing this information.

12.12.2 Short-term debt

Regulation S-X Rule 5-02 also includes disclosure requirements pertaining to short-term obligations for SEC registrants. They include:
  • The amount and terms (including commitment fees and the conditions under which lines may be withdrawn) of unused lines of credit for short-term financing
  • The weighted average interest rate on short term borrowings outstanding as of the date of each balance sheet presented
  • The amount of the lines of credit that support a commercial paper borrowing arrangement or similar arrangements

12.12.3 Collateral

Reporting entities are required by ASC 860-30-50-1A to disclose in the balance sheet or footnotes the fact that assets are pledged as collateral against a liability.

Excerpt from ASC 860-30-50-1A(b)

… As of the date of the latest statement of financial position presented, both of the following:
1. The carrying amount and classifications of both of the following:
i. Any assets pledged as collateral that are not reclassified and separately reported in the statement of financial position in accordance with paragraph 860-30-25-5(a)
ii. Associated liabilities.
2. Qualitative information about the relationship(s) between those assets and associated liabilities; for example, if assets are restricted solely to satisfy a specific obligation, a description of the nature of restrictions placed on those assets.

In our view, whenever the value of the collateral is less than the amount of the debt, it may be misleading to state on the balance sheet that the receivable or payable is "secured" because "secured" may imply "fully secured." Frequently, the value of the collateral is uncertain. Even if the valuation is determinable, and the collateral appears to be adequate, there can be no assurance that such value will persist. Consequently, we do not believe that reporting entities should describe assets pledged as collateral as "secured," even if qualified (such as "partly secured"). The following are illustrative balance sheet line items:
  • Notes receivable pledged as collateral against $X of loans
  • Notes payable (property, plant, and equipment with a net book amount of $X has been pledged as collateral)
  • Notes payable (with collateral consisting of capital stock of certain subsidiaries representing X% of consolidated net assets)
When a reporting entity pledges stock of a consolidated subsidiary as collateral for bond or note issuances of an unconsolidated subsidiary, it should disclose this in the footnotes. It should also indicate the underlying net assets effectively pledged.
Also refer to Regulation S-X Rule 13-02 for guidance on financial statements of affiliates whose securities collateralize any class of securities that are registered or being registered.

12.12.4 Participating mortgage loans

ASC 470-30-50-1 requires issuers of participating mortgages to disclose all of the following:
  • The aggregate amount of participating mortgage obligations
  • The aggregate amount of gross participation liabilities and the related debt discount
  • The lender's participation terms related to:
    • The operations of the mortgaged real estate
    • The increase in the fair value of the mortgaged real estate

12.12.5 Own-share lending arrangements — convertible debt issuance

A reporting entity that enters into a share-lending arrangement on its own shares in contemplation of a convertible debt offering or other financing should disclose a description of any outstanding share-lending arrangements on its own stock. As discussed in ASC 470-20-50-2A, information to be disclosed includes:
  • Number of shares, term, circumstances under which cash settlement would be required, and other significant terms
  • Requirements for the counterparty to provide collateral
  • Reason for entering into the arrangement
  • Fair value of the outstanding loaned shares as of the balance sheet date
  • Treatment for the purposes of calculating earnings per share
  • Unamortized amount and classification of the issuance costs at the balance sheet date
  • Amount of interest cost recognized relating to the amortization of the issuance cost associated with the share-lending arrangement for the reporting period
  • Any amounts of dividends paid related to the loaned shares that will not be reimbursed
As discussed in ASC 470-20-50-2B, a reporting entity that enters into a share-lending arrangement on its own shares in contemplation of a convertible debt offering or other financing is also required to comply with the disclosure requirements of ASC 505, Equity. See FSP 5 for discussion of these requirements.
As discussed in ASC 470-20-50-2C, in the period in which a counterparty defaults, or a reporting entity concludes it is probable that the counterparty to its share-lending arrangement will default, the reporting entity should disclose:
  • The amount of expense reported in the income statement in that period related to the default or any subsequent period
  • Any material changes in the amount of expense recorded due to changes in fair value of the reporting entity's shares or probable recoveries
  • If the default is probable but has not yet occurred, the number of shares related to the share-lending arrangement that will be reflected in basic and diluted earnings per share when the counterparty defaults

12.12.6 Convertible debt—after adoption of ASU 2020-06

ASC 470-20-50-1A discusses the objective of convertible debt disclosures.

ASC 470-20-50-1A

The objective of the disclosure about convertible debt instruments is to provide users of financial statements with:
a. Information about the terms and features of convertible debt instruments
b. An understanding of how those instruments have been reported in an entity’s statement of financial position and statement of financial performance
c. Information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments.

12.12.6.1 Disclosure of pertinent rights and privileges—after adoption of ASU 2020-06

Pursuant to ASC 470-20-50-1B, reporting entities should describe the pertinent rights and privileges of each convertible debt instrument outstanding.

ASC 470-20-50-1B

An entity shall explain the pertinent rights and privileges of each convertible debt instrument outstanding, including, but not limited to, the following information:
a. Principal amount
b. Coupon rate
c. Conversion or exercise prices or rates and number of shares into which the instrument is potentially convertible
d. Pertinent dates, such as conversion date(s) and maturity date
e. Parties that control the conversion rights
f. Manner of settlement upon conversion and any alternative settlement methods, such as cash, shares, or a combination of cash and shares
g. Terms that may change conversion or exercise prices, number of shares to be issued, or other conversion rights and the timing of those rights (excluding standard antidilution provisions)
h. Liquidation preference and unusual voting rights, if applicable
i. Other material terms and features of the instrument that are not listed above.

12.12.6.2 Disclosure of contingently convertible instruments—after adoption of ASU 2020-06

In accordance with ASC 470-20-50-1C, reporting entities with contingently convertible instruments should disclose:
  • Information about events or changes in circumstances that would adjust or change the contingency or would cause the contingency to be met
  • Information about whether the calculation of diluted EPS includes the shares that would be issued if converted and the reasons why or why not
  • Other information that is helpful to understand the nature of contingencies and potential impact of conversion

12.12.6.3 Disclosures for each convertible debt instrument—after adoption of ASU 2020-06

In accordance with ASC 470-20-50-1D, reporting entities should disclose:

Excerpt from ASC 470-20-50-1D

a. The unamortized premium, discount, or issuance costs and, if applicable, the premium amount recorded as paid-in capital in accordance with paragraph 470-20-25-13
b. The net carrying amount
c. For public business entities, the fair value of the entire instrument and the level of the fair value hierarchy in accordance with paragraphs 825-10-50-10 through 50-15.

These disclosures are required to be made at the individual instrument level.

12.12.6.4 Additional disclosures for convertible debt instruments—after adoption of ASU 2020-06

ASC 470-20-50-1E provides additional information reporting entities should disclose as of the balance sheet date.

ASC 470-20-50-1E

An entity shall disclose the following information as of the date of the latest statement of financial position presented:
a. Changes to conversion or exercise prices that occur during the reporting period other than changes due to standard antidilution provisions
b. Events or changes in circumstances that occur during the reporting period that cause conversion contingencies to be met or conversion terms to be significantly changed
c. Number of shares issued upon conversion, exercise, or satisfaction of required conditions during the reporting period
d. Maturities and sinking fund requirements for convertible debt instruments for each of the five years following the date of most recent statement of financial position presented in accordance with paragraph 470-10-50-1.

12.12.6.5 Disclosure of interest expense—after adoption of ASU 2020-06

For each period for which a statement of financial performance is presented, reporting entities should disclose, in the aggregate:
  • The effective interest rate for the period
  • The amount of interest recognized, disaggregated by contractual interest expense and the amortization of the premium, discount, or issuance costs

12.12.6.6 Disclosures related to fair value option—after adoption of ASU 2020-06

Reporting entities with convertible debt instruments measured at fair value as a result of applying the fair value option should provide disclosures in accordance with ASC 820-10, ASC 825-10, and ASC 470-20.

12.12.6.7 Derivative disclosures—after adoption of ASU 2020-06

The disclosures in ASC 815 and ASC 470 are required for a conversion option that is accounted for as a derivative.
Further, reporting entities should disclose the following information about derivative transactions entered into in connection with the issuance of convertible instruments, regardless of whether the derivative transactions are accounted for as assets, liabilities, or equity instruments:
  • The terms of the derivative transactions (including terms of settlement)
  • How the derivative transactions relate to the convertible debt instruments
  • The number of shares underlying the derivative transactions
  • The reasons for entering into the derivative transactions

12.12.6A Debt with cash conversion features—before adoption of ASU 2020-06

As discussed in FSP 12.7A, certain convertible debt instruments fall within the scope of the cash conversion guidance in ASC 470-20-15-4 through ASC 470-20-15-5.
ASC 470-20-50-3 through ASC 470-20-50-6 requires the following disclosures to be made as of each balance sheet presented for those instruments:
  • The carrying amount of the equity component
  • The principal amount, the unamortized discount, and the net carrying amount for the liability component
As of the most recent balance sheet date, the reporting entity should disclose the following terms:
  • The remaining period over which any discount on the liability component will be amortized
  • The conversion price and the number of shares issued upon conversion
  • The amount by which the instrument's if-converted value exceeds its principal amount, regardless of whether the instrument is currently convertible (for public entities only)
If any derivatives are executed in connection with these convertible debt instruments, the reporting entity should disclose the following related to the derivatives, regardless of whether the derivatives are accounted for as assets, liabilities, or equity instruments:
  • The derivative transactions' terms
  • How those derivative transactions relate to the instruments
  • The number of shares underlying the derivative transactions
  • The reasons for entering into those derivative transactions
For each period for which an income statement is presented, a reporting entity should disclose both of the following related to the liability component: (1) the effective interest rate and (2) the amount of interest cost recognized relating to both the contractual interest coupon and amortization of the discount.

12.12.7 Troubled debt restructurings

ASC 470-60-50 provides specific disclosures for a troubled debt restructuring. It requires that a troubled borrower disclose the following, either in the financial statements or the footnotes:
  • A description of the principal changes in terms, major features of settlement, or both
  • Aggregate gain on restructuring of payables
  • Aggregate net gain or loss on transfers of assets recognized during the period (see FSP 22 for guidance on transfers)
  • Per-share amount of the aggregate gain on restructuring of payables
Reporting entities may group separate restructurings within a fiscal period for the same category of payables (for example, accounts payable or subordinated debentures) for disclosure purposes.
For financial statement periods after the troubled debt restructuring, the borrower should disclose amounts contingently payable that are included in the carrying amount of restructured payables and the conditions under which those amounts would become payable or be forgiven.

12.12.8 Revolving debt related to long-term projects

When an SEC registrant classifies a borrowing under a long-term project as noncurrent based on the conditions in FSP 12.4.4, it should make appropriate disclosures regarding the existence of such conditions.
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