Defining Issues | May 2017
FASB clarifies scope for share-based payment modifications
KPMG reports on ASU 2017-09, which clarifies what constitutes a modification of a share-based payment award. The ASU specifies when companies will need to apply modification accounting under ASC 718-20.
Applicability
- Company that has share-based payment awards
Relevant dates
Mandatory effective dates and early adoption provisions:
Effective date:
Annual periods – Fiscal years beginning after
Interim periods – In fiscal years beginning after
Early adoption allowed?
All entities
Dec. 15, 2017
Dec. 15, 2017
Yes, for reporting periods for which financial statements have not yet been issued (public business entities) / made available for issuance
Key impacts
- Modification accounting’ is accounting for the changes in terms or conditions of a share-based payment award
- Companies are required to apply modification accounting unless the fair value, vesting conditions and classification of the modified award are the same immediately before and after the modification of the award
- Companies that modify award terms or conditions because of the effect of new accounting guidance, laws or regulations need to consider the modification accounting criteria to determine if there is a modification; this could result in compensation costs changes
- Even though companies may not be required to apply modification accounting to some award changes, there may still be tax consequences
- The amendments apply prospectively
Related content
Defining Issues on the proposals, which have been finalized without substantive changes: FASB proposes scope clarification for share-based payment modifications
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