NORWALK, Conn.--(BUSINESS WIRE)--The Financial Accounting Standards Board (FASB) today 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.
“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,” said FASB Chairman Russell G. Golden. “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 payment transactions was identified as an area for simplification through:
1. Outreach for the Simplification Initiative
2. Ongoing dialogue with the Private Company Council (PCC) about making improvements to the accounting for share-based payments, and
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.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector organization, based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit www.fasb.org.