FASB seeks comments on proposed clarifications to share-based consideration payable to a customer

FASB has published a proposed Accounting Standards Update (ASU) to improve the accounting guidance for share-based consideration payable to a customer in conjunction with selling goods or services.  

The proposed changes are expected to improve financial reporting results by requiring revenue estimates to more closely reflect an entity’s expectations. In addition, the proposed changes would 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 proposal would affect the timing of revenue recognition for entities that offer to pay share-based consideration (for example, 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. Specifically, the proposed amendments would 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. 

Stakeholders are encouraged to review and provide input on the proposed ASU by Nov. 14, 2024.