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.


ASU 2017-09

  • 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



Subscribe to our newsletter

Receive timely updates on accounting and financial reporting topics from KPMG.

Receive timely updates on accounting and financial reporting topics from KPMG.