FASB issues update on modification accounting for share-based payment awards

By Anslee Wolfe

In a new accounting standard issued Wednesday, FASB hopes to provide clarity by offering guidance on the scope of modification accounting for share-based payment awards.

Accounting Standards Update No. 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, gives direction on which changes to the terms or conditions of these awards require an entity to apply modification accounting in ASC Topic 718, according to a news release.

The confusion has stemmed from the word "modification," according to the standard. It's defined by FASB as "a change in any of the terms or conditions of a share-based payment award," a definition some stakeholders found too broad, leading to diversity in practice. The new standard provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting.

In addition to reducing diversity in practice, the standard is designed to lower costs and complexity for entities when they apply the guidance in Topic 718.

The standard is effective for all entities for annual periods beginning after Dec. 15, 2017—and interim periods within those annual periods. Early adoption is allowed.

Anslee Wolfe is a freelance writer in Colorado Springs, Colo. To comment on this article or to suggest an idea for another article, contact Ken Tysiac, editorial director, at Kenneth.Tysiac@aicpa-cima.com or 919-402-2112.

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