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Multiple-security issuance belongs in a dated, class-level equity analysis. A multiple-security issuance exchanges one amount of consideration for two or more securities. First identify every unit issued, then allocate the proceeds with supported relative fair values or a justified residual method.
Apply it
If common stock worth $600,000 and warrants worth $200,000 are issued together for $720,000, relative values allocate $540,000 to common stock and $180,000 to warrants. The allocations still sum to the proceeds.
Review multiple-security issuance against common stock. Reconcile multiple-security issuance to preferred stock, the dated multiple-security issuance evidence, and its final presentation.
The multiple-security issuance record ties common stock to its source date, measured amount, and preferred stock effect.
Keep the boundary clear
Do not choose the residual security to obtain a preferred earnings result. Classification and measurement of a warrant or convertible feature may require guidance outside Topic 505.
Authority
Read ASC 505-10-25-2 for own-capital transactions outside net income.
Put the concept to work
Apply this concept
- Explain and apply multiple-security issuance within a reconciled class-level equity workpaper using supplied authoritative facts.
Learning resources
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Build on these ideas
- Par or stated value — Apply
To apply this concept: Required. This prior idea supplies the quantities or classification needed for the current analysis.