Equity Award Modifications: Connecting the Theory to Practical Cases

This updated white paper provides a holistic discussion of the share-based payment accounting model for modifications. Our focus starts with the economic theory underpinning the accounting guidance in ASC 718 (FAS 123R). We then consider how to navigate the theory and guidance in numerous real-life scenarios that draw from our experience handling hundreds of modifications. Finally, we introduce a reference sheet that can be leveraged by key stakeholders in financial reporting, corporate leadership, human resources, executive compensation, tax, and legal.

Because of complex accounting guidance and endless creativity in structuring modifications to solve strategic HR needs, modification accounting is among the most misunderstood and misapplied areas of share-based compensation. This white paper devotes substantial time to both common and less common modification cases to provide practitioners with the tools needed to correctly report on and account for modifications.