FASB Issues Final FSP for Cash Settlements on Contingent Events

Last week the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) No. FAS 123(R)-4:Classification of Options and Similar Instruments Issued as Employee Compensation That Allow for Cash Settlement upon the Occurrence of a Contingent Event. The guidance in this FSP amends paragraphs 32 and A229 of FASB Statement No. 123: Share-Based Payment.


Advertisement


Easy & Profitable Client Payroll with PayCycle

Now is a great time to get clients set up for payroll. We’d like to invite you to a FREE 60-minute web seminar sponsored by PayCycle, the leader in on-demand payroll. During this informative session, you’ll discover how to:

  1. Automate payroll tasks from paychecks to W-2’s
  2. Save time with electronic tax payments and filings
  3. Increase year-round firm profitability without adding staff or infrastructure

Come see for yourself how easy and profitable payroll can be - CLICK HERE TO REGISTER Hurry! Spaces are limited and the sessions fill up quickly.

All PayCycle webinar attendees will receive 1 month free on PayCycle’s service. After the free period, PayCycle costs just $14.99 per client per month for the first 5 employees. Each additional employee is just $0.25 per month. This low monthly fee includes everything you need to process payroll, including a firm-branded website for clients, direct deposit, electronic tax payments and filings, seamless integration with QuickBooks, ATX, CCH and other leading accounting software, free customer support with payroll experts, customized marketing resources to solicit your payroll service to clients, and much more.

Learn More Register for a Web Seminar Sign Up Now


According to the FSP, a cash settlement feature that can be exercised only when a contingent event outside the employee’s control occurs, does not meet the conditions of paragraphs 32 and A229 until it is probable the event will occur. When the contingent cash settlement event becomes probable, the entity recognizes a share-based liability equal to the portion of the award attributed to past service for options or other similar instruments. The guidance is applicable only for options, or similar instruments, issued as part of employee compensation arrangements and shall be applied upon initial adoption of Statement 123(R). Entities that have already adopted Statement 123(R) shall apply this FSP guidance in the first reporting period after February 3, 2006, the date on which the FSP was posted to the FASB web site.

The majority of the Board supported the probability approach because it provides internal consistency between the classification of shares and options or similar instruments, then they are issued as employee compensation and embody a conditional obligation to transfer assets. Further, the majority of the Board did not believe an entity should arrive at a different classification based on whether the exchange for employee services was in the form of shares versus an option to purchase shares.

You may like these other stories...

Read more from Larry Perry here and in the Today's World of Audits archive.One of the most significant analytical procedures is reading, or scanning, the general ledger account activity. Whether it's done manually or...
Event Date: May 15, 2014, 1 pm ETThis presentation will review basic concepts of the FRF for SMEs and discuss the presentation of a statement of financial position. This webcast will focus on accounting policies for certain...
London Stock Exchange switches auditing to EYThe London Stock Exchange will drop PwC as its auditor and replace it with EY after completion of the audit for the year ending March 2014, Harriet Agnew of the Financial Times...

Upcoming CPE Webinars

Apr 24
In this session Excel expert David Ringstrom, CPA introduces you to a powerful but underutilized macro feature in Excel.
Apr 25
This material focuses on the principles of accounting for non-profit organizations' revenues. It will include discussions of revenue recognition for cash and non-cash contributions as well as other revenues commonly received by non-profit organizations.
Apr 30
During the second session of a four-part series on Individual Leadership, the focus will be on time management- a critical success factor for effective leadership. Each person has 24 hours of time to spend each day; the key is making wise investments and knowing what investments yield the greatest return.
May 1
This material focuses on the principles of accounting for non-profit organizations’ expenses. It will include discussions of functional expense categories, accounting for functional expenses and allocations of joint costs.