In May 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No. 2017-09, Stock Compensation, Topic 718, Scope of Modification Accounting (the ASU).
The FASB issued the ASU to provide clarity and reduce the “diversity in practice” among companies and accountants in applying ASC 718 to changes to the terms or conditions of share-based payment awards.
When a company makes a substantive change to a share-based payment award, it must apply modification accounting (which is usually undesirable). But the ASC 718 offered little guidance as to what changes are substantive, thereby leading to the diversity in practice among accounting firms.
The ASU should reduce the instances that an entity is required to apply modification accounting to a share-based payment award.
To read the story, click here.