D.8 Share-Based Payment Considerations

If the target is determined to be the accounting acquirer and the SPAC does not meet the definition of a business, an entity should consider whether the preexisting target awards were modified as part of the SPAC merger. When performing this assessment, the entity should pay careful attention to the original terms of the preexisting target awards and any changes that result from the SPAC merger. This assessment may include the evaluation of any earn-out arrangements with the grantees, including earn-out arrangements in which grantees are subject to ongoing service requirements after the SPAC merger. In addition, the entity should consider the effect, if any, of a SPAC merger on any antidilution provisions included in the original terms of the target awards. These determinations may require consultation with legal counsel. For further discussion of the accounting for modifications, see Chapter 6 of Deloitte’s Roadmap Share-Based Payment Awards.

As noted in Section D.7.2, companies may have earn-out share arrangements that provide earn-out shares to grantees that are subject to forfeiture. We believe that if any forfeited shares are subsequently reallocated to the remaining grantees that are subject to the earn-out share arrangement, the reallocation solely to grantees is analogous to a “last man standing” arrangement. Under that view, the forfeiture and subsequent redistribution of the awards to grantees are accounted for as (1) the forfeiture of the original award and (2) the grant of a new award. For more information, see Section 10.7.3 of Deloitte’s Roadmap Share-Based Payment Awards.