FASB simplifies accounting for share-based payments to nonemployees

By Jeff Drew

FASB on Wednesday released an Accounting Standards Update (ASU) designed to improve the financial reporting for share-based payments issued to nonemployees for goods or services.

The ASU broadens the scope of FASB ASC Topic 718, Compensation — Stock Compensation, which currently covers only share-based payments to employees. The change substantially aligns the accounting for share-based payments for both employees and nonemployees. The ASU supersedes Subtopic 505-50, Equity — Equity-Based Payments to Non-Employees.

“Stakeholders recommended that the FASB improve the accounting for nonemployee share-based payments to reduce cost and complexity to apply the guidance, while improving the financial reporting for these transactions,” FASB Chairman Russell G. Golden said in a news release. “This standard will make it easier for companies to account for the share-based payments they provide to service providers, suppliers, and other people that are not employees.”

The accounting for nonemployee share-based payments was identified as an area for simplification from ideas submitted to FASB as part of the board’s simplification initiative; ongoing dialogue with the Private Company Council about improving share-based payment accounting; and the August 2014 post-implementation review of FASB Statement No. 123(R), Share-Based Payment.

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

Jeff Drew (Jeff.Drew@aicpa-cima.com) is a JofA senior editor.

SPONSORED REPORT

2018 financial reporting survey: Challenges and trends

Learn the top reporting challenges that emerged in a survey of more than 800 finance, accounting, and compliance professionals across the world, and compare them with your organization's obstacles.

PODCAST

How the skill set for today’s CFO is changing

Scott Simmons, a search expert for large-company CFOs, gives advice for the next generation of finance leaders and more, including which universities are regularly producing future CEOs and CFOs.