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The ASC Master Glossery defines a freestanding instrument as, “A financial instrument that meets either of the following conditions: a) It is entered into separately and apart from any of the entity’s other financial instruments or equity transactions; b) It is entered into in conjunction with some other transaction and is legally detachable and separately exercisable.”

Certain sections of the ASC modify this general definition of a freestanding instrument by providing more descriptive language of the specific instruments or the specific terms of instruments that are within the scope of a particular section. For example, ASC 480, Liabilities – Distinguishing Liabilities from Equity states that its guidance applies to any freestanding instrument, including instruments that have “…any of the following attributes: a) comprises more than one option or forward contract; b) Has characteristics of both a liability and equity and, in some circumstances, also has characteristics of an asset.” This kind of language does not redefine the meaning of freestanding instrument, but it does expand or narrow the scope of the freestanding instrument as it applies to a particular ASC section or subsection.

Sections of the ASC referenced within this analysis tool that, and any scope modifications that vary from the general definition of ‘freestanding instrument’ will be highlighted and analyzed where each section is cited.

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