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Improvements to Nonemployee Share-Based Payment Accounting - FASB ASU 2018-07 NEW!

Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting - FASB ASU 2016-09 

Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting - FASB ASU 2017-09 

FASB Accounting Standards Update No. 2017-09 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting

FASB Accounting Standards Update No. 2017-09 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting 

Podcast: Audit Partner Steven Vertucci Discusses the Newest FASB Accounting Standards Update - Improvements to Nonemployee Share-Based Payment Accounting 

FASB Proposed Accounting Standards Update 2016-360 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting

FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

FASB Accounting Standards Update No. 2014-12 - Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period


Articles

Improvements to Nonemployee Share-Based Payment Accounting - FASB ASU 2018-07

Summary - The FASB has issued an Accounting Standards Update (ASU) intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments.

The ASU expands the scope of Topic 718, Compensation—Stock Compensation (which currently only includes share-based payments to employees) to include share-based payments issued to nonemployees for goods or services. Consequently, the accounting for share-based payments to nonemployees and employees will be substantially aligned. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

The amendments in this ASU are effective for public companies for fiscal years beginning after December 15, 2018, including interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue from Contracts with Customers.

For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting - FASB ASU 2016-09

Summary Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows.
 
The amendments also simplify the accounting for private companies:
  1. Private companies can now apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics.
  2. Private companies can now make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value.
Effective - The amendments are effective for public companies for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any interim or annual period.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting - FASB ASU 2017-09

Summary - The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.

Effective - Effective for all entities for annual periods, including interim periods within those annual
periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for:
  • Public business entities for reporting periods for which financial statements have not yet been issued.
  • All other entities for reporting periods for which financial statements have not yet been made available for issuance.
For more information, click here.
 
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2017-09 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting 

Summary - Click here to listen to our podcast featuring Collins Ncho, Supervising Audit Senior, discuss the new FASB guidance that clarifies that all changes to share-based payment awards are not necessarily accounted for as a modification. The podcast also includes who is affected by this update, when it will go into effect and what questions companies need to ask their accountants as it pertains to this update.

The FASB has issued Accounting Standards Update (ASU) No. 2017-09, Compensation-Stock Compensation (Topic 718) - Scope of Modification Accounting. ASU 2017-09 applies to entities that change the terms or conditions of a share-based payment award.
 
The FASB adopted ASU 2017-09 to provide clarity and reduce diversity in practice as well as cost and complexity when applying the guidance in Topic 718, Compensation-Stock Compensation, to the modification of the terms and conditions of a share-based payment award.
 
Diversity in practice has arisen in part because some entities apply modification accounting under Topic 718 for modifications to terms and conditions that they consider substantive, but do not when they conclude that particular modifications are not substantive. Others apply modification accounting for any change to an award, except for changes that they consider purely administrative in nature. Still others apply modification accounting when a change to an award changes the fair value, the vesting, or the classification of the award. In practice, it appears that the evaluation of a change in fair value, vesting, or classification may be used to evaluate whether a change is substantive.
 
Although the Master Glossary of the FASB Accounting Standards Codification™ currently defines the term modification as "a change in any of the terms or conditions of a share-based payment award," Topic 718 does not contain guidance on what changes are substantive or purely administrative.
 
The amendments in ASU 2017-09 include guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.
 
These amendments require the entity to account for the effects of a modification unless all of the following conditions are met:
  • The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the modified award is the same as the fair value (or value using an alternative measurement method) of the original award immediately before the original award is modified. If the modification does not affect any of the inputs to the valuation technique that the entity uses to value the award, the entity is not required to estimate the value immediately before and after the modification;
  • The vesting conditions of the modified award are the same as the vesting conditions of the original award immediately before the original award is modified; and
  • The classification of the modified award as an equity instrument or a liability instrument is the same as the classification of the original award immediately before the original award is modified.
The amendments are effective for all entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2017.
 
Early adoption is permitted, including adoption in any interim period for: (a) public business entities for reporting periods for which financial statements have not yet been issued, and (b) all other entities for reporting periods for which financial statements have not yet been made available for issuance. The amendments should be applied prospectively to an award modified on or after the adoption date.
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2017-09 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting

Summary - The amendments provide guidance on determining which changes to the terms and conditions of share-based payment awards require an entity to apply modification accounting under Topic 718.
 
Effective for all entities for annual periods, including interim periods within those annual periods, beginning after December 15, 2017. Early adoption is permitted, including adoption in any interim period, for:
  • Public business entities for reporting periods for which financial statements have not yet been issued.
  • All other entities for reporting periods for which financial statements have not yet been made available for issuance.
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

Podcast: Audit Partner Steven Vertucci Discusses the Newest FASB Accounting Standards Update - Improvements to Nonemployee Share-Based Payment Accounting

Summary - Our newest podcast this month features Steven Vertucci, Audit Partner, as he discusses one of the FASB updates featured in our April newsletter, Topic 718, which pertains to improvements to nonemployee share-based payment accounting. Steven also provides information on who this update affects and when it will go into effect.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Proposed Accounting Standards Update 2017-220 - Compensation - Stock Compensation (Topic 718) - Improvements to Nonemployees Share-Based Payment Accounting

Summary - The FASB has issued proposed Accounting Standards Update (ASU), Compensation - Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This proposed ASU is intended to reduce cost and complexity and to improve financial reporting for nonemployee share-based payments. Stakeholders are encouraged to review and provide comments on the proposal by June 5, 2017.

The proposed ASU would expand the scope of Topic 718, Compensation: Stock Compensation, which currently only includes payments to employees, to include payments for goods and services to nonemployees. Consequently, the accounting for share-based payments to nonemployees and employees would be similar. The proposed ASU would supersede Subtopic 505-50, Equity: Equity Based Payments to Non-Employees.
 
The accounting for nonemployee share-based payment transactions was identified as an area for simplification through:
  • Ideas submitted to the FASB as part of the FASB's Simplification Initiative;
  • The Private Company Council's ongoing dialogue about making improvements to accounting for share-based payments; and
  • The Post-Implementation Review of FASB Statement No. 123(R), Share-Based Payment.
The FASB will determine an effective date after redeliberating input received during the comment period.
For more information, click here.
 
© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

FASB Proposed Accounting Standards Update 2016-360 - Compensation - Stock Compensation (Topic 718) - Scope of Modification Accounting

Summary - The FASB has issued proposed ASU, Compensation - Stock Compensation (Topic 718): Scope of Modification Accounting. Comments wer due by January 6, 2017. The amendments in this proposal would affect any entity that changes the terms or conditions of a share-based payment award.

The proposed amendments would provide guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. An entity would account for the effects of a modification unless all the following are the same immediately before and after the modification:

  • The fair value (or calculated value or intrinsic value, if such an alternative measurement method is used) of the award;
  • The vesting conditions of the award; and
  • The classification of the award as an equity instrument or a liability instrument.

The current disclosure requirements in Topic 718 would apply regardless of whether an entity is required to apply modification accounting under the proposed amendments. The proposed amendments would be applied prospectively to awards modified on or after the effective date, which will be determined after the FASB considers stakeholder feedback on the proposal.

For more information, click here.

© 2017 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting

Summary -  The FASB has issued Accounting Standards Update (ASU) No. 2016-09,Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The amendments are intended to improve the accounting for employee share-based payments and affect all organizations that issue share-based payment awards to their employees.

Several aspects of the accounting for share-based payment award transactions are simplified, including: (a) income tax consequences; (b) classification of awards as either equity or liabilities; and (c) classification on the statement of cash flows.

The amendments also simplify two areas specific to private companies:
  1. Practical Expedient for Expected Term: In lieu of estimating the period of time that a share-based award will be outstanding, private companies can now apply a practical expedient to estimate the expected term for all awards with performance or service conditions that have certain characteristics.
  2. Intrinsic Value: Private companies can now make a one-time election to switch from measuring all liability-classified awards at fair value to measuring them at intrinsic value. Previously, private companies were provided an option to measure all liability-classified awards at intrinsic value, but some private companies were unaware of that option.
Accounting for employee share-based awards was identified by the Private Company Council (PCC) as an area of concern among private company stakeholders. The PCC worked with the FASB to discuss and analyze the issues that private companies have encountered in this area when applying the standard. The PCC also asked the FASB staff to conduct outreach with users as a part of the FASB's pre-agenda research on the topic.

The FASB also considered the conclusions in the Financial Accounting Foundation's Post-Implementation Review Report on Statement 123(R), Share-Based Payment. Though the report concluded that the prior standard achieved its purpose, it noted that certain areas within Statement 123(R) may be costly and difficult to apply.

For public companies, the amendments are effective for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For private companies, the amendments are effective for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Early adoption is permitted for any organization in any interim or annual period.

For more information, click here.

© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.

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FASB Accounting Standards Update No. 2014-12 - Compensation - Stock Compensation (Topic 718) - Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period

 
The amendments in ASU 2014-12 require that a performance target that affects vesting and that could be achieved after the requisite service period be treated as a performance condition. A reporting entity should apply existing guidance in Topic 718, Compensation - Stock Compensation, as it relates to awards with performance conditions that affect vesting to account for such awards. The performance target should not be reflected in estimating the grant-date fair value of the award.

Compensation cost should be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service has already been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost should be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period should reflect the number of awards that are expected to vest and should be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved.
 
Effective for annual periods and interim periods within those annual periods beginning after December 15, 2015. Early adoption is permitted. The effective date is the same for both public business entities and all other entities. Entities may apply the amendments in this ASU either: (a) prospectively to all awards granted or modified after the effective date; or (b) retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter.
 
For more information, click here.
 
© 2016 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.