EITF 13-D was initially raised by FASB on May 30, 2013 and discussed the issue of how to account for the terms of a share-based payment award. The issue circled around discussion of how performance targets affect accounting for share-based payments. The EITF debated whether to allow employees to earn their rewards even if the performance target is met after the completion of required service (McArthur). Previously, performance conditions were not reflected in the estimate of the grant-date fair value of the award but other non-vesting conditions were considered in deciding the fair value. Moreover, EITF 13-D addressed the fact that ASC 718 (Stock Compensation) did not specify that employees, except retirement-eligible ones, have to be providing service when the performance target is achieved. These emerging concerns reveal some flaws that currently exist in our accounting system. Last month, the Task Force eventually reached a consensus on the main issue. As part of the conclusion, we will introduce the final agreement and its according transitions related to firms. Prior to that, we will explain the three different views on the main issue in detail.
View A of this issue details the first approach for accounting for a performance target. Under this view, a performance target is synonymous to a performance condition in that it will have an effect on vesting. Therefore, an entity will not have the granted ability to record compensation cost until it is very likely that the performance target will be met (Prince). Currently, a performance condition does not detail whether or not an employee needs to be providing current service when the performance target is finally reached (FASB, 13-D Issue Summary No. 1).
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...ter requisite service period, allow the cost of compensation to be recognized when the target is probable to be achieved, even if this occurs after the required service is completed by an employee. The non vesting approach takes the probability of the performance target being met into account when determining the fair value of awards. The cost of compensation is recognized throughout the requisite service period, regardless of the actual performing target. The liability approach was proposed last year, but it was denied for its noncompliance with cash settlement. Recently the Task Force has come to the agreement in following the performance condition approach, and to apply a prospective transition approach to adapt to new updates (Althoff). However global corporations need to be aware of the discrepancy in IFRS rules, which are in favor of the non-vesting approach.
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