The Financial Accounting Standards Board has released a proposed Accounting Standards Update that would harmonize, with certain exceptions, accounting for share-based payments to non-employees, with the accounting for share-based payments to employees.
Requests to simplify the accounting for share-based payments to non-employees — given in exchange for goods and services — by bringing it closer to accounting for share-based payments to employees contained in FASB Codification Section 718 emanated from the post-implementation review of FAS 123R on Share-Based Payments, as well as requests from advisory groups, including the FASB’s Private Company Council.
The proposal would:
Current GAAP vs. proposed changes
SOURCE: FASB in Focus (March 7, 2017): Proposed Accounting Standards Update: Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting
Effective date and transition
The FASB has not specified a proposed effective date in this proposed ASU, but rather seeks input from stakeholders, including their thoughts on what an appropriate effective date would be. Potential interaction with the effective date of the new standard on revenue recognition could be considered.
The FASB’s proposed method for entities to transition to the new standard would be a cumulative-effect adjustment to retained earnings as of the beginning of the annual period of adoption. However, a non-public entity that substitutes calculated value for expected volatility when measuring share-based payment awards would apply the proposed amendments prospectively to all awards that are measured at fair value after the effective date.
Additionally, according to the FASB:
See FASB’s proposed ASU: Proposed Accounting Standards Update: Compensation-Stock Compensation (Topic 718): Improvements to Non-employee Share-Based Payment Accounting
Learn more from the MACPA’s and The Business Learning Institute’s courses covering FASB developments. Search for the term “FASB” in our online CPE catalogue of live events, webcasts, and on-demand courses.
And it may still be busy season, but it’s not too soon to think about attending the MACPA’s Beach Retreat, featuring courses like the Accounting and Auditing Update. This year’s Beach Retreat will take place from June 28-30 at the Clarion Resort Fontainebleau Hotel in Ocean City.