The Financial Accounting Standards Board issued an accounting standards update Thursday to offer guidance on share-based consideration payable to a customer in conjunction with selling goods or services.
The changes aim to improve financial reporting results by dealing with the intersection of the requirements of FASB’s revenue recognition and stock compensation standards, Topics 606 and 718 in FASB’s Accounting Standards Codification.
The amendments to the two standards 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 buy its goods and services. The amendments clarify the requirements for share-based consideration payable to a customer that vests when a customer buys a particular volume or monetary amount of goods and services from the entity.
The amendments take effect for all entities for annual reporting periods (including interim reporting periods within annual reporting periods) starting after Dec. 15, 2026, but early adoption is allowed.
