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FASB Clarifies Accounting For Modifications Of Stock Compensation

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This ASU changes the guidance for determining which modifications to the terms of an existing stock compensation award require the application of modification accounting in Topic 718. The purpose of this ASU is to reduce diversity in practice and the cost and complexity associated with share-based payment awards.
June 1, 2017

The FASB has issued ASU 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting.

This ASU changes the guidance for determining which modifications to the terms of an existing stock compensation award require the application of modification accounting in Topic 718. The purpose of this ASU is to reduce diversity in practice and the cost and complexity associated with share-based payment awards. Under this new standard, modification accounting must be followed unless all of the following conditions are met:

  • The fair value of the modified award is the same as the fair value of the original award prior to modification
  • The vesting conditions of the modified award are the same as the vesting conditions of the original award
  • The classification of the modified award as an equity or liability instrument is the same as the classification of the original award

This is anticipated to increase the number of changes to awards that are considered to be modifications under Topic 718.

This change in accounting is effective for annual periods and interim periods beginning after December 15, 2017. Early adoption is permitted.

The full text of ASU 2017-09 is available here.

 

Readers should not act upon information presented without individual professional consultation.


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