News Release 11/11/19

FASB Improves Accounting for Share-Based Payments Made to Customers

Norwalk, CT, November 11, 2019—The Financial Accounting Standards Board (FASB) today issued an Accounting Standards Update (ASU) that simplifies and increases comparability of accounting for nonemployee share-based payments, specifically those made to customers.

 “The new standard continues our efforts to simplify and improve reporting of share-based payments—in this case, those paid to customers” said FASB Chairman Russell G. Golden. “The new standard also will give financial statement users a clearer, more consistent picture of these awards.”

This ASU will affect companies that issue share-based payments (for example, options or warrants) to their customers. Similar to issuing a cash rebate to a customer, issuing a share-based payment to a customer can incentivize additional purchases. The share-based payments can also serve a strategic purpose by aligning the interests of a supplier and its customer, because the customer’s additional purchases increase its investment in the supplier.

In June 2018, the FASB issued an ASU that expanded the scope of Topic 718, Compensation—Stock Compensation, to include share-based payments to nonemployees in exchange for goods and services. That ASU substantially aligned the accounting for share-based payments to nonemployees and employees. However, it required share-based payments to nonemployee customers to be accounted for under Topic 606, Revenue from Contracts with Customers, as a reduction of revenue, similar to other sales incentives (such as coupons and rebates).

While that ASU provided guidance on the income statement classification of payments to customers (as a reduction of revenue), that ASU did not specify when to measure such awards or how to classify awards on the balance sheet (for example as a liability or as equity). To address diversity in these areas, the new guidance requires companies to measure and classify (on the balance sheet) share-based payments to customers by applying the guidance in Topic 718. As a result, the amount recorded as a reduction in revenue would be measured based on the grant-date fair value of the share-based payment.

Measuring and classifying share-based payments to customers under Topic 718 provide the following improvements:
  • Fewer measurement dates for the instruments
  • Fewer instances of classifying the instruments as liabilities, and
  • More consistent accounting with share-based payments made to other nonemployees.
The new ASU, including its effective dates, is available at

About the Financial Accounting Standards Board

Established in 1973, the FASB is the independent, private-sector organization, based in Norwalk, Connecticut, that establishes financial accounting and reporting standards for public and private companies and not-for-profit organizations that follow Generally Accepted Accounting Principles (GAAP). The FASB is recognized by the Securities and Exchange Commission as the designated accounting standard setter for public companies. FASB standards are recognized as authoritative by many other organizations, including state Boards of Accountancy and the American Institute of CPAs (AICPA). The FASB develops and issues financial accounting standards through a transparent and inclusive process intended to promote financial reporting that provides useful information to investors and others who use financial reports. The Financial Accounting Foundation (FAF) supports and oversees the FASB. For more information, visit