Proposed Simplifications to Share-Based Payment Accounting
On June 8, the Financial Accounting Standards Board (FASB) issued a proposed Accounting Standards Update, Improvements to Employee Share-Based Payment Accounting, to address clarity, comparability and economics of stock-based compensation transactions. The update is part of FASB’s ongoing simplification initiative designed to reduce cost and complexity of accounting standards while maintaining or improving the usefulness of financial statement information.
The proposed changes to the accounting guidance are applicable to companies awarding share-based compensation to employees. If adopted, there would be an immediate recognition, measurement and presentation effect on net income, earnings per share and the statement of cash flows. The following updates are applicable to all companies: income tax consequence and forfeiture expense recognition, classification of certain awards with repurchase features as equity or liability, changes to the statutory withholding limits and classification on the statement of cash flows. In addition, the revised standards would offer two practical expedients for private companies only.