On Mar. 21, FASB issued standard related to profits interest awards.
FASB issued standard to clarify accounting guidance related to profits interest awards.
Profits Interest Awards
Added illustrative guidance to help entities determine whether profits interest and similar awards should be accounted for as share-based payment arrangements.
Arrangements within scope of Accounting Standards Topic 718, Stock Compensation.
Certain entities, typically private companies, provide employees with profits interest and similar awards to align compensation with the company’s operating performance.
Provides those holders with the opportunity to participate in future profits/ equity.
The Private Company Council and other stakeholders noted diversity in practice in accounting for these awards as share-based payment arrangements under Topic 718.
Provides an example to demonstrate how entities that account for profits interest would determine if profits interest award should be accounted for in line with Topic 718
Effectiveness
For public business entities, effective for annual periods beginning after Dec. 15, 2024.
For all other entities, effective for annual periods beginning after Dec. 15, 2025.
