Chapter 10 — Business Combinations
In a business combination, share-based payment awards held by grantees of the
acquiree are often exchanged for share-based payment awards of the acquirer. ASC 805
refers to the new awards as “replacement awards.” The acquirer must analyze the
terms of both the preexisting and the replacement awards to determine what portion
of the replacement awards is related to precombination vesting (i.e., past goods or
services) and therefore part of the consideration transferred in the business
combination. The portion of replacement awards that is related to postcombination
vesting (i.e., future goods or services) should be recognized as compensation cost
in the postcombination period.