On March 21, 2024, FASB issued Accounting Standards Update (ASU) 2024-01, Scope Application of Profits Interest and Similar Awards, to clarify the accounting guidance on profits interest. Due to the current lack of authoritative guidance, diversity in practice has arisen; entities most commonly analogize to treatment as a share-based payment (Accounting Standards Codification (ASC) 718) or a form of deferred compensation (ASC 710). This article provides details on ASU 2024-01, which adds an illustrative example (with four fact patterns) to assist entities in determining whether a profits interest award should be accounted for under ASC 718. Download the PDF for more information.
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