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This chapter discusses the specific annual presentation and disclosure requirements in the financial statements and footnotes for stockholders’ equity and noncontrolling interest accounts. Interim presentation and disclosure requirements differ and are discussed in FSP 29.
Unlike the balance sheet and income statement, the statement of stockholders’ equity is not a required financial statement. Both the FASB and the SEC allow changes in stockholders’ equity accounts to be disclosed either in a statement or in the footnotes, although most reporting entities do present changes in stockholders’ equity in a statement.
The chapter begins with the disclosures required for all classes of equity, and then details the presentation and disclosure considerations by classes of equity.
The impact of various types of equity on earnings per share is addressed in FSP 7. Stockholders’ equity presentation and disclosure considerations related to limited liability companies and partnerships are detailed in FSP 32.
New guidance
In August 2020, the FASB issued ASU 2020-06, Debt—Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging—Contracts in Entity’s Own Equity (Subtopic 815-40). The ASU simplifies the accounting for certain financial instruments with characteristics of liabilities and equity. The ASU reduces the number of accounting models for convertible debt and convertible preferred stock instruments and makes certain disclosure amendments to improve the information provided to users. In addition, the ASU amends the derivative guidance for the “own stock” scope exception (see FG 5) and certain aspects of the EPS guidance (see FSP 7).
For public business entities that meet the definition of an SEC filer, excluding entities eligible to be smaller reporting companies as defined by the SEC, the guidance is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years. The one-time determination of whether an entity is eligible to be a smaller reporting company is based on an entity’s most recent determination as of August 5, 2020, in accordance with SEC regulations. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2023, including interim periods within those fiscal years. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. The ASU also specifies that an entity must adopt the guidance as of the beginning of its annual fiscal year and is not permitted to adopt the guidance in an interim period, other than the first interim period of their fiscal year.
Guidance in this chapter has been updated to reflect the new ASU and impacted sections are denoted with “after adoption of ASU 2020-06” and “before adoption of ASU 2020-06.”
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