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US standard-setter simplifies accounting rules for employee pay perks.

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TLDR:

  • Financial Accounting Standards Board provides clarity on accounting for employee pay perks tied to company performance.
  • Update applies to profits interest and similar awards aligning bonuses with company performance.

Businesses that award employees with pay perks tied to company performance received clarification from the Financial Accounting Standards Board (FASB) on how to account for these awards. The update specifically addresses profits interest and similar awards that align bonuses or payments with company performance. While the update does not provide specific instructions, it offers additional guidance for companies to determine if the perks they grant fall within the scope of ASC 718, which covers accounting rules for share-based compensation.

Prior to this update, businesses and accountants found it challenging to determine whether these types of awards qualified under existing accounting standards. The clarification from FASB aims to assist companies in properly accounting for these employee pay perks.

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