Defining Issues  |  December 2017

 

Adoption of new accounting standards may lead to share-based payment award modifications

KPMG reports on accounting implications of changes to share-based payment awards after adoption of a new accounting standard or a voluntary accounting change. If adoption of a new accounting standard or a voluntary accounting change affects operating results or performance metrics, a company may need or want to re-evaluate its performance conditions and the underlying compensation objectives for its share-based payment awards.

Applicability

Accounting for share-based payments

  • Companies with share-based payment awards that include performance conditions

Relevant dates

  • Effective immediately

Key impacts

  • Financial statement preparers are entering a period of significant accounting change with the approaching effective dates of the new accounting standards for revenue recognition, leases and credit losses
  • Some companies have anticipated changes to performance conditions by incorporating a provision in their plan documents or the terms of an award to continue to compute operating results under the old accounting principle in order to evaluate whether the performance condition was met
  • Another common approach to preserve an award’s original compensation objective is to modify its performance condition with an aim to retain the original difficulty of achieving the performance condition
  • Flowcharts summarize the points to consider when a modification is made to preserve the value of share-based payment awards after adoption of a new accounting standard or a voluntary accounting change.

Report contents

  • Applicability
  • Key impacts and considerations
  • Preservation provisions
  • Example
  • Flowchart: when plan documents or the awards contain a preservation provision
  • Flowchart: when plan documents or awards do not contain a preservation provision

Related content

Handbook: Accounting for share-based payments


 

 

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