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On June 20, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-07
Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. This ASU expanded the scope of Topic 718 to include share-based payments to nonemployees in exchange for goods and services (the “awards”) and stipulated that such awards be accounted for under Topic 606
Revenue from Contracts with Customers when granted to a customer in conjunction with selling goods or services. While Topic 606 provides guidance on presentation, it does not specify when to measure the awards or how to classify them on the balance sheet. The FASB received feedback from stakeholders that this lack of guidance could lead to diversity in practice.
To address this diversity, on November 11, 2019, the FASB issued ASU No. 2019-08
Compensation – Stock Compensation (Topic 718) and Revenue from Contracts with Customers (Topic 606): Codification Improvements – Share-Based Consideration Payable to a Customer. The amendments in this ASU require entities to measure and classify share-based payments awards granted to a customer in accordance with the guidance in Topic 718.
As a result, the accounting for the awards is simplified as follows:
For entities that have not yet adopted ASU No. 2018-07, the amendments are effective as follows:
For entities that already have adopted ASU No. 2018-07, the amendments are effective for fiscal years beginning after December 15, 2019, including interim periods therein.
Early adoption is permitted, but no earlier than an entity’s adoption date of ASU No. 2018-07.
To access the full script of ASU No. 2019-08, click
To access the full script of ASU No. 2018-07, click
For more information on the financial reporting library, contact a local
MNP Assurance Professional, or
Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of November 11, 2019. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person’s use of or reliance upon this material. © MNP LLP 2019. All rights reserved.
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