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FASB Issues Guidance on Nonemployee Share-Based Payments

June 27, 2018

The Financial Accounting Standards Board (“FASB”) has issued new guidance aimed to lower costs and improve financial reporting related to nonemployee share-based payments. Accounting Standards Update (“ASU”) No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting, expands on Topic 718, Compensation—Stock Compensation to comprise of share-based payments issued to nonemployees and aligns the accounting of share-based payments to nonemployees and employees. The new standard also replaces Subtopic 505-50, Equity—Equity-Based Payments to Non-Employees.

The guidance under ASU No. 2018-07 is effective for public companies for fiscal years, as well as interim periods within those years, starting after December 15, 2018. All other companies must apply the guidance to fiscal years starting after December 15, 2019, and interim periods within those years starting after December 15, 2020.

Early adoption is allowed, but not prior to an entity’s adoption date of Topic 606, Revenue from Contracts with Customers.