FASB proposes guidance on share-based consideration

The Financial Accounting Standards Board issued a proposed accounting standards update Monday to enhance the accounting guidance for share-based consideration payable to a customer in conjunction with selling goods or services. 

FASB anticipates the proposed changes will improve financial reporting results by requiring revenue estimates to more closely reflect an entity's expectations. The proposed revisions also aim to enhance comparability and better align the requirements for share-based consideration payable to a customer with the principles in Topic 606, Revenue from Contracts with Customers, the overall revenue recognition standard.

The proposal would impact the timing of revenue recognition for entities that offer to pay share-based consideration (such as equity instruments) to a customer (or to other parties that purchase the entity's goods or services from the customer) to incentivize the customer (or its customers) to purchase its goods and services. The proposed amendments would specifically clarify the requirements for share-based consideration payable to a customer that vests upon the customer purchasing a specified volume or monetary amount of goods and services from the entity.

FASB is asking stakeholders to review and provide input on the proposed ASU by Nov. 14, 2024.

Patrick Dorsman/Financial Accounting Foundation

Separately on Monday, the International Accounting Standards Board, which developed the revenue recognition standard with FASB, issued a post-implementation review of the standard, where it's known as IFRS 15, and found it's generally working as intended and providing investors with useful information. However, the IASB is also looking into possibly making a few tweaks that it will add to its next agenda consultation in late 2025. Issues include how companies decide whether they are the main seller or an agent in a transaction; how to report on payments to customers; and how IFRS 15 works alongside several other IFRS accounting standards.