10.10 Acquiree Awards That Expire as a Result of the Business Combination
ASC 805-30
30-10 In situations in which
acquiree awards would expire as a consequence of a business
combination and the acquirer replaces those awards even
though it is not obligated to do so, all of the
fair-value-based measure of the replacement awards shall be
recognized as compensation cost in the postcombination
financial statements. That is, none of the fair-value-based
measure of those awards shall be included in measuring the
consideration transferred in the business combination.
In accordance with ASC 805-30-30-10, if an acquiree’s share-based
payment awards will expire as a result of a business combination under the terms of
the original award but the acquirer issues replacement awards even though it is not
obligated to do so, “all of the fair-value-based measure of the replacement awards
shall be recognized as compensation cost in the postcombination financial
statements. That is, none of the fair-value-based measure of those awards shall be
included in measuring the consideration transferred in the business combination.”
In most cases, however, an acquirer is obligated to replace the
acquiree’s awards or they remain outstanding after the acquisition.