2. Add paragraph 718-10-30-28, with a link to transition paragraph 718-10-65-3, as follows:
Compensation—Stock Compensation—Overall Initial Measurement
> Market, Performance, and Service Conditions
718-10-30-27 Performance or service conditions that affect vesting are not reflected in estimating the fair value of an award at the grant date because those conditions are restrictions that stem from the forfeitability of instruments to which employees have not yet earned the right. However, the effect of a market condition is reflected in estimating the fair value of an award at the grant date (see paragraph 718-10-30-14). For purposes of this Topic, a market condition is not considered to be a vesting condition, and an award is not deemed to be forfeited solely because a market condition is not satisfied.
718-10-30-28 In some cases, the terms of an award may provide that a performance target that affects vesting could be achieved after an employee completes the requisite service period. That is, the employee would be eligible to vest in the award regardless of whether the employee is rendering service on the date the performance target is achieved. A performance target that affects vesting and that could be achieved after an employee's requisite service period shall be accounted for as a performance condition. As such, the performance target shall not be reflected in estimating the fair value of the award at the grant date. Compensation cost shall be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the requisite service already has been rendered. If the performance target becomes probable of being achieved before the end of the requisite service period, the remaining unrecognized compensation cost for which requisite service has not yet been rendered shall be recognized prospectively over the remaining requisite service period. The total amount of compensation cost recognized during and after the requisite service period shall reflect the number of awards that are expected to vest and shall be adjusted to reflect those awards that ultimately vest. The requisite service period ends when the employee can cease rendering service and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the requisite service period.
3. Amend paragraph 718-10-55-88, with a link to transition paragraph 718-10-65-3, as follows:
Implementation Guidance and Illustrations
> Illustrations
> > Example 1: Estimating the Requisite Service Period
718-10-55-88 Because the employee is eligible to retire at the grant date, the award's explicit service condition is nonsubstantive. Consequently, Entity A has granted an award that does not contain a performance or service condition for vesting, that is, the award is effectively vested, and thus, the award's entire fair value should be recognized as compensation cost on the grant date. All of the terms of a share-based payment award and other relevant facts and circumstances must be analyzed when determining the requisite service period.
4. Add paragraph 718-10-65-3 and its related heading as follows:
> Transition Related to Accounting Standards Update No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for ShareBased Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period
718-10-65-3 The following represents the transition and effective date information related to Accounting Standards Update No. 2014-12, Compensation—Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could Be Achieved after the Requisite Service Period:
- The pending content that links to this paragraph shall be effective for annual periods and interim periods within those annual periods, beginning after December 15, 2015.
- The pending content that links to this paragraph may be applied prospectively to all share-based payment awards that are granted or modified on or after the effective date.
- The pending content that links to this paragraph also may be applied retrospectively to all awards with performance targets that are outstanding as of the beginning of the earliest annual period presented in the financial statements and to all new or modified awards thereafter. If retrospective transition is adopted, the cumulative effect of applying the pending content that links to this paragraph as of the beginning of the earliest annual period presented in the financial statements shall be recognized as an adjustment to the opening retained earnings balance at that date. Additionally, if retrospective transition is adopted, the use of hindsight is permitted in the measurement and recognition of compensation cost.
- Earlier application of the pending content that links to this paragraph is permitted.
- An entity shall provide the disclosures in paragraphs 250-10-50-1 through 50-3 in the period the entity adopts the pending content that links to this paragraph.
5. Amend paragraph 718-10-00-1, by adding the following items to the table, as follows:
718-10-00-1 The following table identifies the changes made to this Subtopic.
Paragraph Number |
Action |
Accounting Standards Update |
Date |
718-10-30-28 |
Added |
2014-12 |
06/19/2014 |
718-10-55-88 |
Amended |
2014-12 |
06/19/2014 |
718-10-65-3 |
Added |
2014-12 |
06/19/2014 |
The amendments in this Update were adopted by the unanimous vote of the seven members of the Financial Accounting Standards Board:
Russell G. Golden, Chairman
James L. Kroeker, Vice Chairman
Daryl E. Buck
Thomas J. Linsmeier
R. Harold Schroeder
Marc A. Siegel
Lawrence W. Smith