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FASB issues guidance on share-based awards with performance targets attainable after the requisite service period

  • FASB (US Financial Accounting Standards Board) Image

Jun 20, 2014

The FASB has issued ASU 2014-12* in response to the consensus of the Emerging Issues Task Force on EITF Issue 13-D.**

The ASU amends the guidance in ASC 718 and clarifies that entities should treat performance targets that can be met after the requisite service period of a share-based payment award as performance conditions that affect vesting. Accordingly, an entity would not record compensation expense (measured as of the grant date without taking into account the effect of the performance target) related to an award for which transfer to the employee is contingent on the entity’s satisfaction of a performance target until it becomes probable that the performance target will be met.

The ASU’s guidance is effective for reporting periods (including interim periods) beginning after December 15, 2015.

For more information, see the related Deloitte Accounting Journal entry and the ASU on the FASB’s Web site.

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* FASB Accounting Standards Update No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period (a consensus of the FASB Emerging Issues Task Force). 

** EITF Issue No. 13-D, “Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period.”

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