A reporting entity is required to explain the pertinent rights and privileges of all outstanding classes of securities.
ASC 505-10-50-3 and ASC 505-10-50-3A include the following examples of information that should be summarized within the financial statements:
  • Dividend and liquidation preferences
  • Participation rights
  • Call prices and dates
  • Sinking-fund requirements
  • Unusual voting rights
  • Significant terms of contracts to issue additional shares
  • Terms that may change conversion or exercise prices (excluding standard antidilution provisions)
  • Conversion or exercise prices and pertinent dates
  • Number of shares issued upon conversion, exercise, or satisfaction of required conditions during the most recent annual fiscal period and any subsequent interim period presented
  • Actual changes to conversion or exercise prices that occur during the reporting period (excluding changes due to standard antidilution provisions)
  • For a financial instrument with a down round feature that has been triggered during the reporting period and for which an entity has recognized the effect in accordance with ASC 260-10-25-1 (i.e., treated as a dividend and as a reduction of income available to common stockholders in basic earnings per share), an entity should disclose the fact that the feature has been triggered and the value of the related effect.
Public companies should show any discount on shares (or any unamortized discount balance) separately as a deduction from the related shares’ account, as required by S-X 4-07. See FSP 5.7 for information on disclosures required for contracts in an entity's own equity (e.g., warrants).
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