FASB Proposes Clarifications to the Accounting for Share-Based Consideration Payable to a Customer

The FASB has issued a proposed ASU that would clarify the guidance in both ASC 606 and ASC 718 on the accounting for share-based payment awards that are granted by an entity as consideration payable to its customer. The proposed ASU’s purpose is to reduce diversity in practice and improve existing guidance, primarily by revising the definition of a “performance condition” and eliminating a forfeiture policy election for service conditions associated with share-based consideration payable to a customer. In addition, the proposal would clarify that the variable consideration constraint guidance in ASC 606 does not apply to share-based consideration payable to a customer even before the criteria are met for establishing a grant date under ASC 718.

Comments on the proposed ASU are due by November 14, 2024. For more information, see the press release on the FASB’s Web site.