FASB Task Force Says Performance Target Plans Will Be Accounted for As If Not Vested Until Target Is Met

On September 13, the Financial Accounting Standards Board Emerging Issues Task Force 13-D recommended that equity awards that have a performance target that can be met after a service-based vesting requirement will be accounted for as a performance condition that affects also vesting. For instance, a company might provide that an employee must work for three years and the stock price must hit a certain target. The guidance does not specify that an employee must be still working when the performance condition is met to qualify for treatment as a performance condition. The cost of these awards, as a result, is accrued and recognized over the expected period in which they are to be achieved.