Proposed ASU on share-based consideration to a customer
Defining Issues | October 2024
The FASB’s proposal would reduce diversity in practice for share-based consideration to customers.
The proposed ASU provides clarifications including a revised definition of performance condition, elimination of the forfeitures policy election for share-based awards granted to customers, and clarification on the applicability of the variable consideration constraint.
Applicability
- Entities that issue share-based consideration to a customer
Relevant dates
- Exposure draft issued September 30, 2024
- Comments due November 14, 2024
Key impacts
Proposed updates to the guidance on share-based consideration payable to a customer includes:
- Revised definition of performance condition: The proposal would broaden the definition to explicitly include conditions based on volume purchases.
- Elimination of the forfeitures policy election for awards granted to customers: Entities would be required to estimate forfeitures of awards to customers with a service condition.
- Clarified applicability of the variable consideration constraint: The proposal clarifies that the variable consideration constraint in ASC 606 (revenue recognition) would not be applied to share-based consideration payable to a customer.
- Effective date and transition: The proposed amendments would be applied with either a modified retrospective or a full retrospective approach. The FASB will determine the effective dates and whether to allow early adoption after considering stakeholder feedback.
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FASB Proposal
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FASB Projects
As part of its due process, the FASB issues exposure drafts, discussion papers and other project documents for stakeholder review and input
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