FASB streamlines accounting for share-based payments to nonemployees

June 21, 2018

An Accounting Standards Update (ASU) was released by the Financial Accounting Standards Board (FASB) to simplify financial reporting for share-based payments issued to nonemployees for goods or services.

FASB ASC Topic 718, Compensation—Stock Compensation currently covers only share-based payments to employees. The update aligns accounting for share-based payments for both employees and nonemployees. The ASU supersedes Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

For public companies, the changes are effective for fiscal years beginning after Dec. 15, 2018, including all interim periods within that fiscal year. For all other companies, the amendments are effective for fiscal years beginning after Dec. 15, 2019, and interim periods within fiscal years beginning after Dec. 15, 2020. Early adoption is permitted, but no earlier than a company’s adoption date of Topic 606, Revenue From Contracts With Customers.

The ASU will streamline the process for share-based payments that companies provide to service providers, suppliers and nonemployees.

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