Defining Issues | August 2020

 

Insight

Proposed ASU on share-based payment practical expedient

FASB proposes a practical expedient for nonpublic entities valuing share option awards.

Regina Croucher

Regina Croucher

Partner, Dept. of Professional Practice, KPMG US

+1 816-802-5840

Holly Driscoll

Holly Driscoll

Senior Manager, Dept. of Professional Practice, KPMG US

+1 212-954-2103

KPMG reports on a proposed ASU which provides a practical expedient for nonpublic entities to determine the fair value of their share option awards.

Applicability

  • Nonpublic entities that provide share option awards to employees and nonemployees

Relevant dates

August 17, 2020 – FASB issued proposed ASU

October 1, 2020 – Comments due on proposed ASU

Key impacts

  • The FASB’s proposals of the Private Company Council (PCC) would give nonpublic entities a practical expedient to determine the value of share-based payment option awards. 
  • Under the proposals, the current price input of share option awards can be obtained using a valuation in accordance with the ‘presumption of reasonableness’ provisions of Section 409A of the US Internal Revenue Code.
  • The proposals limit the practical expedient to equity-classified share option awards only and would apply on an award-by-award basis.

Report contents

  • Applicability
  • Key facts and impacts
  • Background
  • Proposed guidance
  • Effective dates and transition
  • Next steps

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