The FASB’s proposed ASU, Derivatives Scope Refinements and Scope Clarification for a Share-Based Payment from a Customer in a Revenue Contract, was issued to address two topics: (1) the scope of the derivative accounting guidance in ASC 815, and (2) a seller’s accounting for share-based payments received from customers as part of a revenue arrangement.
In our comments responding to the first issue, we support the Board’s proposed scope exception for contracts with underlyings based on the operations or activities of one of the contractual parties, but ask the Board to clarify some of examples provided.
On the second issue, we support the Board’s proposal to add guidance to ASC 606 clarifying that a share-based payment (such as a warrant) received from a customer should not be recognized until the entity’s right to receive or retain the share-based payment is no longer contingent on satisfying a performance obligation under ASC 606; at this point, the guidance in ASC 815 or ASC 321 would instead apply to the share-based payment. We have several questions, however, about applying the proposed guidance, particularly how it would apply to two common fact patterns we see in practice that are not addressed in the updated example.
To read our comments in full, download our letter.
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