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ASC 505-10-50-11 requires a reporting entity to disclose the redemption requirements for each of the five years following the latest balance sheet only for stock redeemable at fixed or determinable prices and redeemable on fixed or determinable dates. In contrast, S-X 5-02 requires this disclosure for all redeemable preferred stock issued by SEC registrants.
For mandatorily and contingently redeemable securities whose redemption is outside the control of the issuer, in addition to the information in FSP 5.4, S-X 5-02 (27) requires disclosure of the following in a footnote labeled "Redeemable Preferred Stocks:"
  • General description of each issue, including redemption features
  • Rights, if any, of the holders in the event of default, and any impact on junior securities if a required dividend, sinking fund, or other redemption payment is not made
  • Redemption requirements in the aggregate for all issues for each of the five years following the latest balance sheet presented
  • Changes in each issue for each period a statement of comprehensive income is presented
  • A description of the accounting treatment for any difference between the carrying value and redemption amount
ASR 268 requires the following presentation/disclosure for public companies with redeemable equity instruments that are classified outside of permanent equity:

FRP 211.04

ASR 268:
In the interest of clear and prominent disclosure of the future cash obligations attendant with these types of securities, the rules require disclosure of the terms of redemption, five-year maturity data, and changes in these securities in a separate note to the financial statements captioned “Redeemable Preferred Stocks.” It should be noted that although in the past a registrant may have disclosed changes in redeemable preferred stocks in a statement of stockholders’ equity, such changes are now required to be disclosed in a separate note as described above.

Excerpt from FRP 211.03

ASR 268:
Where redeemable preferred stocks are outstanding, the Commission will not prohibit the combining of non-redeemable preferred stocks, common stocks and other equity accounts under an appropriate designated caption (e. g., “Non-Redeemable Preferred Stocks, Common Stocks, and Other Stockholders’ Equity”) provided that any combinations be exclusive of redeemable preferred stocks.

As noted in the excerpt, FRP 211.03 indicates that changes in redeemable preferred stock are required to be disclosed in a separate note. However, we believe that presentation of redeemable securities within the statement of changes in stockholders’ equity is permitted provided the statement is appropriately titled. We believe either alternative is appropriate.
Mandatorily redeemable
In addition to the disclosures in FSP 5.4, reporting entities that issue mandatorily redeemable securities classified as liabilities are required to provide the following disclosures in accordance with ASC 480-10-50:
  • Nature and terms of the financial instrument
  • Rights and obligations of the security, including any settlement alternatives in the contract, and the entity that controls the settlement alternatives
This guidance also requires the following disclosures for each settlement alternative:
  • Amount that would be paid, or the number of shares that would be issued and their fair value, determined based on the conditions in the contract if the settlement were to occur at the balance sheet date
  • How changes in the fair value of the issuer’s equity shares would impact the settlement amounts (see ASC 480-10-50-2(b) for example disclosure)
  • If applicable, the maximum amount that the issuer could be required to pay to redeem the instrument by physical settlement, the maximum number of shares that could be required to be issued, and that a contract does not limit the amount that the issuer could be required to pay or the number of shares that the issuer could be required to issue
  • For a forward contract or an option indexed to an issuer’s equity shares, the forward price or option strike price, the number of issuer’s shares that the contract is indexed to, and the settlement date or dates of the contract

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