Accounting Research Tool
Appendix E — Roadmap Updates for 2023

Appendix E — Roadmap Updates for 2023

Appendix E — Roadmap Updates for 2023

The tables below summarize the substantive changes made in the 2023 edition of this Roadmap.

New Content

Employees of Pass-Through Entities
Added guidance on whether an individual qualifies as an employee of a pass-through entity (e.g., partnership, limited liability corporation, limited liability partnership) in the context of the ASC master glossary definition of “share-based payment arrangements.”
SEC’s Final Rule on the Recovery of Erroneously Awarded Compensation (“Clawback Policies”)
Added guidance to reflect the SEC’s final rule on the recovery of erroneously awarded compensation, which requires issuers to “claw back” excess compensation for the three fiscal years before the determination of a restatement regardless of whether an executive officer had any involvement in the restatement.
Grant Date
Added guidance on determining the grant date for ESPPs.
Added guidance on determining the classification of ESPP awards.

Amended Content

Added discussions of the FASB’s proposed ASU on the scope application of profits interest awardsand the SEC’s final rule related to the recovery of erroneously awarded compensation (“clawbacks”).
Profits Interests and Other Awards Issued by Pass-Through Entities
Added Changing Lanes to acknowledge the FASB’s proposed ASU on the scope application of profits interest awards.
Communication Date
Expanded discussion of considerations related to determining whether a recipient has the ability to negotiate the key terms and conditions of an award. Clarified that the term “relatively short time period” applies only to determining the communication date of a share-based payment award and should not be applied to other aspects of ASC 718.
Service Condition
Clarified that an entity would make its accounting policy election for forfeitures separately for employee and nonemployee awards.
Estimating Forfeitures
Expanded discussion to include considerations for entities that elect to estimate forfeitures related to recognizing compensation that is at least equal to the grant-date fair-value-based measure of the vested portion of that award.
Performance Condition
Added ESG targets to the examples of performance conditions.
Graded Vesting for Employee Awards
Clarified that an entity’s use of either a straight-line or an accelerated attribution method represents an accounting policy election that should be applied consistently to all similar awards, including awards that have been modified.
Only One Condition Must Be Met — Employee Awards
Added Example 3-26 to illustrate an award that vests upon the satisfaction of either a performance condition or a market condition.
Liquidity Event and Target IRR
Clarified the guidance for certain awards that may vest only if (1) a target IRR to shareholders is achieved while the grantee is employed and (2) the IRR is based on the payment of sufficient proceeds tendered as a result of either distributions to shareholders or the sale of sufficient equity.
Multiple Performance Conditions and Multiple Service Periods
Expanded the discussion of Case A in ASC 718-10-55-94 (regarding an award with multiple annual performance targets) to clarify that when a performance condition in one particular year does not affect the outcome of any preceding or subsequent period, each tranche should be accounted for as a separate award with its own service inception date.
Cash Loans Through Nonrecourse Notes
Added Example 3-38 to illustrate the accounting for cash loaned to an employee in exchange for a nonrecourse note secured by shares.
Capitalization of Compensation Cost
Updated to list examples of other sections of U.S. GAAP under which the capitalization of share-based compensation costs is required.
Fair-Value-Based Measurement
Clarified that although the valuation of share-based payments that are subject to ASC 718 is excluded from the scope of ASC 820, entities should apply the measurement guidance in ASC 820 unless it is inconsistent with the guidance in ASC 718.
Current Market Price of the Underlying Share
Expanded the discussion of the guidance in SAB 120 to note that a material increase in the market price of an entity’s shares upon the release of “material non-public information within a short period of time after the measurement date” indicates that “market participants would have considered an adjustment to the observable market price on the measurement date.”
Repurchase Features — Noncontingent Puttable Stock Awards
Added Example 5-9 to illustrate the accounting for the repurchase of shares at fair value more than six months from the date on which stock options were exercised and the shares became outstanding.
Substantive Terms
Added Example 5-18 to illustrate the impact of an entity’s ability to deliver shares on the substantive terms and classification of the award.
SEC Guidance on Temporary Equity
Updated to provide examples of situations in which awards would be classified in temporary equity.
Replacement of Acquiree Awards
Updated to discuss circumstances in which (1) the terms of the acquiree’s award are silent or give the acquiree discretion regarding the award’s treatment upon a change-in-control event and (2) the acquiree’s award is replaced. In such cases, the acquirer should account for the replacement award as if the acquirer were obligated to replace it.
Changes in Forfeiture Estimates or Actual Forfeitures in the Postcombination Period
Expanded the discussion of View B (reversal of compensation cost for the acquisition-date fair-value-based measure of the awards not expected to vest or that do not actually vest, regardless of whether that measure was attributed to precombination or postcombination vesting) to analogize to ASC 805-30-55-13, which describes changes in the fair-value-based measure of liability-classified awards after the acquisition date.
Changes in the Probability of Meeting a Performance Condition in the Postcombination Period
Clarified that a change in the expected outcome of a performance condition from improbable to probable should result in the accrual of compensation cost on the basis of the acquisition-date fair-value-based measure of all awards expected to vest.
Modification to the Original Terms of the Awards to Add a Change-in-Control Provision in Contemplation of a Business Combination
Expanded the discussion of “in contemplation of” to indicate that (1) a modification during the negotiation of a business combination is presumed to benefit the acquirer and (2) a modification before negotiations have been entered into is presumed to benefit the acquiree.