FASB proposes simplifying accounting for share-based payments to nonemployees

By Ken Tysiac

Accounting for share-based payments to nonemployees in exchange for goods and services would become similar to the accounting for share-based payments to employees under a proposal FASB issued Tuesday.

The proposal was designed to reduce cost and complexity and improve financial reporting for nonemployee share-based payments. Under the proposal, the scope of Accounting Standards Codification Topic 718, Compensation—Stock Compensation, would be expanded to include share-based transactions to acquire goods or services from nonemployees.

Currently, Topic 718 applies only to share-based payments to employees. The proposal would supersede Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

Comments can be made on the proposal through June 5 on FASB’s website.

The impetus for the proposal came from ideas submitted to FASB as part of the board’s simplification initiative; the Private Company Council’s ongoing dialogue about improving share-based payment accounting; and the post-implementation review of FASB Statement No. 123(R), Share-Based Payment.

The post-implementation reviewers concluded in 2014 that although Statement No. 123(R) achieves its purpose, private company stakeholders sometimes find it difficult to understand and costly to apply.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.

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