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A recent accounting standards update addresses an age-old question related to share-based payments: When does a change in terms and conditions require modification accounting in ASC Topic 718, Stock Compensation?
Guidance for accounting for the effects of a modification to the terms and conditions left some room for interpretation. By the Financial Accounting Standards Board (FASB)'s definition, modification means a change in the terms and conditions of a share-based payment award. There has been diversity in practice as it relates to whether or not a change to the terms or conditions of a share-based award is in fact a "modification." Some entities evaluate whether a change in the terms and conditions is substantive. Others applied modification accounting for any change to an award, other than one that was purely administrative in nature.