Stakeholders are invited to review and comment on the proposed Accounting Standards Update (ASU) by 14 November 2024. Credit: chaylek/Shutterstock.

The Financial Accounting Standards Board (FASB) has released a proposed ASU aimed at refining the accounting for share-based consideration payable to customers.  

The proposed amendments seek to ensure revenue estimates more accurately reflect an entity’s expectations and enhance financial reporting comparability. 

Stakeholders are invited to review and comment on the proposed ASU by 14 November 2024.  

The proposed changes are designed to align with the principles in Topic 606, Revenue from Contracts with Customers, and could impact the timing of revenue recognition for entities that use share-based consideration as an incentive for customers. 

The FASB said: “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 incentivise the customer (or its customers) to purchase its goods and services.” 

The amendments specifically address how to account for share-based consideration that vests following a customer’s purchase of a specified volume or monetary amount of goods and services.  

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Last week, the FASB also published a proposed ASU to refine hedge accounting guidance.  

This update, prompted by global reference rate reform and stakeholder feedback, aims to better represent economic hedging activities in financial statements. 

Introduced in 2017, ASU No. 2017-12 was intended to more accurately reflect an entity’s risk management activities and simplify the application of hedge accounting.  

However, during the FASB’s 2021 agenda consultation project, stakeholders identified areas where the current guidance could hinder the application of hedge accounting for effective hedging relationships. 

The latest proposed ASU addresses these stakeholder concerns by potentially allowing more economic hedges to qualify for hedge accounting.  

This change could provide investors with more information to aid in decision making.  

Additionally, stakeholders have highlighted the need for updates in the hedge accounting guidance to accommodate the ongoing reference rate reform.  

In August 2024, the FASB introduced a new chapter to its Conceptual Framework focusing on the recognition and derecognition in financial statements.