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Amendments to ASC 718 - Part II

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November 04, 2014 | Barbara Baksa

Amendments to ASC 718 - Part II

Last week, I blogged about the proposed amendments to ASC 718.  This week, I have some more information about them.

Is This a Done Deal?

Pretty much.  The FASB has already considered—and rejected—a number of different alternatives on most of these issues.  My understanding is that there was consensus among Board members as to each of the amendments and most of the changes aren't really controversial, so we don't expect there to be much debate about them.

Tax accounting is an exception, of course. This change is very controversial; in fact, the FASB considered this approach back when they originally drafted FAS 123(R) and ultimately rejected it is because of the volatility it introduces to the income statement.  So perhaps there will be some opposition to this change.

What's the Next Step?

The FASB will issue an exposure draft with the text of the changes, then will solicit comments, make changes as necessary, and issue the final amendments.  I have hopes that we'll see an exposure draft by the end of the year, with possibly the final amendments issued in the first half of next year.

ASC 718(R)?

No, the new standard will not be called "ASC 718(R)," nor will the amendments be a separate document. That's the advantage of Codification.  The amendments will be incorporated into existing ASC 718, just as if they had been there all along. In a few years, you may forget that we ever did things differently.

What's the Next Project?

This isn't the FASB's last word on ASC 718. They have a number of additional research projects that could result in further amendments to the standard:

    • Non-Employees:  In my opinion, the most exciting research project relates to the treatment of non-employees. As I'm sure you know, it is a big pain to grant awards to consultants, et. al., because the awards are subject to liability treatment until vested.  The FASB is considering whether consultants should be included within the scope of ASC 718, with awards to them accounted for in the same manner as employee awards. If not for all consultants, than at least for those that perform services similar to that of employees.
    • Private Companies: Another research project covers a number of issues that impact private companies, such as 1) practical expedients related to intrinsic value, expected term, and formula value plans and 2) the impact of certain features, such as repurchase features, on the classification of awards as a liability or equity.
    • Unresolved Performance Conditions:  Another project relates to awards with unresolved performance conditions. I'll admit that I'm not entirely sure what this is.

That's All, For Now

That's all I have on this topic for now. You can expect more updates when we hear more news on this from the FASB.

A big thank-you to Ken Stoler and Nicole Berman of PwC for helping me sort through the FASB's announcement. If you haven't already, be sure to check out their Equity Expert Podcast on the amendments.

- Barbara

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