Tentative Board decisions are provided for those interested in following the Board’s deliberations. All of the reported decisions are tentative and may be changed at future Board meetings.
Wednesday, November 1, 2023 FASB Board Meeting
Scope application of profits interest awards: compensation—stock compensation (Topic 718). The Board discussed feedback received and issues for redeliberation on the proposed Accounting Standards Update, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest Awards, and made the following decisions.
Scope and Applicability
The Board affirmed its decision that the amendments apply to all entities, including public business entities (PBEs) and entities other than PBEs.
The Board clarified that the amendments apply to awards to both employees and nonemployees.
Illustrative Example and Other Requested Improvements
The Board decided to revise the proposed illustrative example to:
Transition and Transition Disclosures
The Board affirmed its decision that an entity should apply the amendments either (1) retrospectively or (2) prospectively with disclosure of the nature of and reason for the change in accounting principle.
Effective Date and Early Adoption
The Board decided that the amendments will be effective for PBEs for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. The Board decided that the amendments will be effective for entities other than PBEs for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. The Board also decided that early adoption will be permitted.
Analysis of Benefits and Costs
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments and that the expected benefits of the amendments would justify the expected costs.
Next Steps
The Board directed the staff to proceed to a draft of a final Accounting Standards Update for vote by written ballot.
Accounting for government grants. The Board decided to add a project to its technical agenda on the accounting for the recognition, measurement, and presentation of government grants received by business entities. The project would apply to all business entities.
Scope
The Board decided that the scope would include transfers of monetary and tangible nonmonetary assets from a government to a business entity, including forgivable loans.
The Board also decided to specify that the scope would exclude exchange transactions, including transactions with a government that are within the scope of Topic 606, Revenue from Contracts with Customers, and Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. The scope would also exclude items accounted for under Topic 740, Income Taxes, as well as below-market interest rate loans and government guarantees.
Recognition, Measurement, and Presentation
The Board decided that a government grant should be recognized when it is probable that (1) the entity will comply with the conditions of the grant and (2) the grant will be received.
Grants Related to Income
The Board decided that a government grant related to income (that is, a government grant other than a grant related to assets) should be recognized in the income statement in the periods in which the entity incurs the grant-related costs.
The Board decided to require presentation of the grant on the balance sheet as deferred income and on the income statement, separately, as a credit balance in the related income statement category.
Grants Related to Assets
The Board decided that a government grant related to assets (that is, a monetary grant for the acquisition or construction of an asset as well as a grant of a nonmonetary asset) should be recognized as part of the cost of the asset (that is, a cost-accumulation approach).
Statement of Cash Flows
The Board decided that cash flows from government grants should be presented on the basis of the principles in Topic 230, Statement of Cash Flows.
Disclosure
The Board decided that entities that have government grants within the scope of this project would apply the applicable disclosures in Topic 832, Government Assistance. The Board also agreed to consider additional disclosures that may be decision useful at a future meeting.
Wednesday, November 1, 2023 FASB Board Meeting
Scope application of profits interest awards: compensation—stock compensation (Topic 718). The Board discussed feedback received and issues for redeliberation on the proposed Accounting Standards Update, Compensation—Stock Compensation (Topic 718): Scope Application of Profits Interest Awards, and made the following decisions.
Scope and Applicability
The Board affirmed its decision that the amendments apply to all entities, including public business entities (PBEs) and entities other than PBEs.
The Board clarified that the amendments apply to awards to both employees and nonemployees.
Illustrative Example and Other Requested Improvements
The Board decided to revise the proposed illustrative example to:
- Add a case that demonstrates how an entity would evaluate whether it has “issued (or offered to issue) its shares, share options, or other equity instruments” in applying paragraph 718-10-15-3
- Clarify, in Cases A and B, how an entity should consider periodic distributions in applying paragraph 718-10-15-3.
Transition and Transition Disclosures
The Board affirmed its decision that an entity should apply the amendments either (1) retrospectively or (2) prospectively with disclosure of the nature of and reason for the change in accounting principle.
Effective Date and Early Adoption
The Board decided that the amendments will be effective for PBEs for fiscal years beginning after December 15, 2024, and interim periods within those fiscal years. The Board decided that the amendments will be effective for entities other than PBEs for fiscal years beginning after December 15, 2025, and interim periods within those fiscal years. The Board also decided that early adoption will be permitted.
Analysis of Benefits and Costs
The Board concluded that it has received sufficient information and analysis to make an informed decision on the expected costs and expected benefits of the amendments and that the expected benefits of the amendments would justify the expected costs.
Next Steps
The Board directed the staff to proceed to a draft of a final Accounting Standards Update for vote by written ballot.
Accounting for government grants. The Board decided to add a project to its technical agenda on the accounting for the recognition, measurement, and presentation of government grants received by business entities. The project would apply to all business entities.
Scope
The Board decided that the scope would include transfers of monetary and tangible nonmonetary assets from a government to a business entity, including forgivable loans.
The Board also decided to specify that the scope would exclude exchange transactions, including transactions with a government that are within the scope of Topic 606, Revenue from Contracts with Customers, and Subtopic 610-20, Other Income—Gains and Losses from the Derecognition of Nonfinancial Assets. The scope would also exclude items accounted for under Topic 740, Income Taxes, as well as below-market interest rate loans and government guarantees.
Recognition, Measurement, and Presentation
The Board decided that a government grant should be recognized when it is probable that (1) the entity will comply with the conditions of the grant and (2) the grant will be received.
Grants Related to Income
The Board decided that a government grant related to income (that is, a government grant other than a grant related to assets) should be recognized in the income statement in the periods in which the entity incurs the grant-related costs.
The Board decided to require presentation of the grant on the balance sheet as deferred income and on the income statement, separately, as a credit balance in the related income statement category.
Grants Related to Assets
The Board decided that a government grant related to assets (that is, a monetary grant for the acquisition or construction of an asset as well as a grant of a nonmonetary asset) should be recognized as part of the cost of the asset (that is, a cost-accumulation approach).
Statement of Cash Flows
The Board decided that cash flows from government grants should be presented on the basis of the principles in Topic 230, Statement of Cash Flows.
Disclosure
The Board decided that entities that have government grants within the scope of this project would apply the applicable disclosures in Topic 832, Government Assistance. The Board also agreed to consider additional disclosures that may be decision useful at a future meeting.