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FASB Issues Simplifications to Accounting for Nonemployee Share-Based Payments

The Financial Accounting Standards Board (FASB)
today issued an Accounting Standards Update (ASU) intended to reduce
cost and complexity and to improve financial reporting for nonemployee
share-based payments.

The ASU expands the scope of Topic
718, Compensation—Stock Compensation (which currently only includes
share-based payments to employees) to include share-based payments
issued to nonemployees for goods or services. Consequently, the
accounting for share-based payments to nonemployees and employees will
be substantially aligned. The ASU supersedes Subtopic
505-50, Equity—Equity-Based Payments to Non-Employees.

“Stakeholders recommended that the FASB improve the accounting for
nonemployee share-based payments to reduce cost and complexity to apply
the guidance, while improving the financial reporting for these
transactions,” said FASB
Chairman Russell G. Golden. “This standard will make it easier for
companies to account for the share-based payments they provide to
service providers, suppliers, and other people that are not employees.”

The accounting for nonemployee share-based payment transactions was
identified as an area for simplification through:

1. Outreach for the Simplification
Initiative

2. Ongoing dialogue with the Private
Company Council (PCC) about making improvements to the accounting
for share-based payments, and

3. The August 2014 Post-Implementation
Review Report on FASB Statement No. 123 (revised 2004), Share-Based
Payment.

The amendments in this ASU are effective for public companies for fiscal
years beginning after December 15, 2018, including interim periods
within that fiscal year. For all other companies, the amendments are
effective for fiscal years beginning after December 15, 2019, and
interim periods within fiscal years beginning after December 15, 2020.
Early adoption is permitted, but no earlier than a company’s adoption
date of Topic
606, Revenue from Contracts with Customers.

More information about the
ASU, including a FASB
in Focus overview, is available at www.fasb.org.

About the Financial Accounting Standards Board

Established in 1973, the FASB is the independent, private-sector
organization, based in Norwalk, Connecticut, that establishes financial
accounting and reporting standards for public and private companies and
not-for-profit organizations that follow Generally Accepted Accounting
Principles (GAAP). The FASB is recognized by the Securities and Exchange
Commission as the designated accounting standard setter for public
companies. FASB standards are recognized as authoritative by many other
organizations, including state Boards of Accountancy and the American
Institute of CPAs (AICPA). The FASB develops and issues financial
accounting standards through a transparent and inclusive process
intended to promote financial reporting that provides useful information
to investors and others who use financial reports. The Financial
Accounting Foundation (FAF) supports and oversees the FASB. For more
information, visit www.fasb.org.

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