A post-implementation review conducted by the Financial Accounting Foundation of a 2004 accounting standard on share-based payment transaction said that it achieved its purpose and provides useful information to financial statement users.

FASB Statement No. 123(R), Share-Based Payment, focuses on the accounting for when companies pay for employee services with equity instruments.

The FAF’s PIR team received input from a wide range of constituents, and concluded that the statement adequately addressed the concern that had prompted it, mainly that companies were not recognizing the cost of employee services paid for with share-based payments.

The team also determined that the standard:

  • Largely converged with a similar IFRS standard;
  • Provided useful information;
  • Was generally understandable and able to be implemented by public companies;
  • Did not incur and significant ongoing costs for public companies; and,
  • Had no significant unintended consequences.

The standard does, however, present some difficulties and costs for private companies, the review found.
“The post-implementation review report on Statement 123(R) identified many positive aspects of the share-based payment standard, including its usefulness to investors,” said FASB Chairman Russell Golden. “Private company stakeholders told the PIR team that the standard is sometimes difficult to understand and costly to apply. This feedback is consistent with input the FASB recently received from stakeholders through outreach for the FASB’s Simplification Initiative and for pre-agenda research for the Private Company Council. … Although we do not plan to undertake a comprehensive review of the standard, we will continue our outreach to stakeholders to identify improvements to account for share-based payment transactions. The FASB staff will bring the results of the outreach to the board and the PCC later this year for discussion.”

A copy of the review is available here.

The PIR team will begin their review of FASB Statement No. 160, Noncontrolling Interests in Consolidated Financial Statements, in a few weeks.

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