Proposed ASU on share-based payment modifications

KPMG reports on proposed ASU for ASC 718-20. FASB proposes to clarify when a change in the terms of stock compensation should trigger modification accounting.

Applicability

FASB proposed ASU on Topic 718

• Company that has stock compensation
• Company that is adopting ASC 606 (revenue), ASC 326 (credit impairment, or CECL) and/or ASC 842 (leases)

Relevant dates

• November 17, 2016 – FASB issued proposed ASU
• January 6, 2017 – Comments due on proposed ASU

Key impacts

• Proposed ASU would require companies to apply modification accounting unless the total fair value of the award, vesting conditions and classification of the award remain the same before and after the modification
• Companies would continue to apply modification accounting to changes in awards made in response to laws or regulations – or to new accounting standards such as ASC Topic 606 (revenue), ASC Topic 326 (credit impairment, or CECL) and/or ASC Topic 842 (leases)
• Companies would continue to disclose significant changes in the terms or conditions of a share-based payment award even if they do not result in modification accounting
• There may still be significant tax consequences even if changes in the terms or conditions of a share-based payment award do not result in modification accounting

Report contents

• When to apply modification accounting
• Effect of new accounting standards
• Tax implications
• Disclosure requirements