Defining Issues | March 2017

FASB proposes simplifying the accounting for share-based payments to nonemployees

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KPMG reports on changes to nonemployee share-based payments. The FASB’s proposed ASU would align the accounting for employee and nonemployee share-based payments.


Proposed ASU

  • A company with share-based payments to nonemployees, in exchange for goods or services

Relevant dates

  • March 7, 2017 – FASB issued proposed ASU
  • June 5, 2017 – Comments due on proposed ASU

Key impacts

  • The proposed ASU would eliminate, other than for attribution, the current guidance for equity-based payments to nonemployees
  • Attribution, which represents how the equity-based payment cost is recognized over the vesting period, would continue to be applied for nonemployee awards as if the company issuing equity had paid cash for the goods and/or services
  • Companies would be required to use the contractual term as an input, instead of using a determined expected term, for valuing nonemployee equity share options or similar instruments
  • Nonpublic companies are permitted to elect as of the effective date to:  change fair value measured liability-classified nonemployee awards to be measured at intrinsic value; and measure equity share options and similar instruments issued to nonemployees at a calculated value that uses historical volatility of an appropriate industry sector index, instead of the company’s share price


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Report contents

  • Applicability
  • Key facts and impacts
  • Attribution of nonemployee awards
  • Valuation of nonemployee equity share options
  • Effective date election
  • Transition
  • Next Steps



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