FASB Considering Changes to ASU 2018-07

FASB Considering Changes to ASU 2018-07

On November 14, 2016, FASB decided to make certain improvements to Accounting Standards Update No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting.

According to the November 16, 2018 FASB Action Alert, FASB ”

decided to add a project to its technical agenda to clarify the accounting for share-based payments that are made as consideration payable to a customer. The Board decided that such payments would be measured and classified using the guidance in Topic 718.
The Board decided the following about transition:

  1. For entities that have not adopted the amendments in Update 2018-07, the proposed Update would have the same transition and effective date requirements as Update 2018-07.
  2. For entities that have adopted the amendments in Update 2018-07, the same transition provisions as Update 2018-07 would be applied retrospectively to all relevant prior periods beginning with the initial adoption date of Update 2018-07.
  3. Any awards issued where the grant date is prior to the initial adoption date of Update 2018-07 should be measured prospectively using fair value at the initial adoption date of Update 2018-07.

The Board determined that the expected benefits of the changes related to its proposed amendments of the accounting for share-based payments made to a customer under Topic 606, Revenue from Contracts with Customers, justify the expected costs of the changes.

The Board directed the staff to draft a proposed Accounting Standards Update for vote by written ballot. The Board decided to expose the proposed Update for public comment for a period ending on March 29, 2019, or for 30 days (whichever is longer).”

Therefore, if companies have or are considering applying ASU 2018-07, they should review these proposed changes once ready by the FASB Staff. If desired, companies can provide comments on the proposed changes through the later of March 29, 2019 or 30 days after the proposed Update is released.

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FASB Updates Accounting Rules for Stock Compensation

From the FASB’s April 16, 2010 e-mail release:

Today the FASB issued Accounting Standards Update No. 2010-13, Compensation—Stock Compensation (Topic 718): Effect of Denominating the Exercise Price of a Share-Based Payment Award in the Currency of the Market in Which the Underlying Equity Security Trades (a consensus of the FASB Emerging Issues Task Force).

The amendments in this Update are effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010.

Link to the Accounting Standards Update: http://www.fasb.org/cs/ContentServer?c=Document_C&pagename=FASB%2FDocument_C%2FDocumentPage&cid=1176156807475

Key takeaways:

  • Applies to employee share-based payment awards with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades that differs from the functional currency of the employer entity or payroll currency of the employee.
  • The amendments clarify that a share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition. Therefore, such an award should not be classified as a liability if it otherwise qualifies as equity.
  • The amendments to Topic 718 will be effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010.
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