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1. Summarize the main points of the current exposure draft 

2. Compare/contrast with current theory/standards.

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1. Summarization of the main points of current exposure draft

Revenue from customer contracts topic 606

The current exposure draft of FASB provides proper recognition of the transaction price and the consideration payable to the customer. As per the current exposure draft, the consideration payable to a customer will include the different amounts in cash which an entity is required to pay to the customer, coupons, vouchers and other credit items which can be applied towards the amount that is being owed to the company and the shares and other types of equity instruments that are being provided in relation to sale of goods and services.
The value of the equity instruments that are being given by the company in relation to sale of goods and services will be calculated and measured in accordance with the stock compensation topic 718. Hence the value of the equity instrument will be calculated as on the grant date of the option and equity instrument. The changes and the update in the value of the equity instrument that take place after the date of grant will not be considered as the part of the transaction price. The changes that are made to the amount of consideration will be reflected in the income statement of the grantor.

Compensation-stock compensation- topic 718

The main motive for accounting in relation to arrangement for payment which are based on shares is the recognition of the goods and services that are being received in lieu of the exchange for granting equity instruments and also recording the cost related to the company in regard to receipt of goods and services. The compensation is being intended to use both the consideration that is to be paid in regard to the use of the goods and services and also the consideration that is to be paid to the customer.

The topic 718 of the stock compensation is being extended to the all the payments that are based on shares in which the goods and services are acquired by the grantor and consideration is being payable to the customer by way of the issue of the shares and other share options and also be way of incurring of liabilities towards the employee which fulfills the specified conditions.

The amount of share based compensation should at least be the part of the price of the share or the equity instrument. The term at least in the amount of share based compensation is being used as the provision of the compensation based on shares can also be indexed in accordance with the price of the share of the company and also other aspects which may not be related to the price of the share of the company, market of the company, company performance and also the conditions of the services provided by the company.

The concept of share based compensation provides that the settlement of the award of the share based compensation may be done by way of issuing the shares of the company and also issuing other instruments of equity.

The provision of the topic 718 of the share based compensation will not be applicable to the transactions which involve the granting of the instruments related to the equity to the lender or other investor who had provided any type of financing to the company issuing the equity instrument.

The consideration which is being based on shares and is payable to the customer shall be shown by way of deduction of the price of the transaction and hence the revenue which is being determined in accordance with the topic 606 but it will not be deducted of the consideration is being made in relation to a distinct type of good or the service. Thus the consideration which is based on shares and is being payable to the customer in lieu of the distinct type of good or service will be accounted as the purchase of the good and services from the suppliers.

The recognition principle in regard to share based compensation provides that the consideration based on shares and payable to the customer will be shown as reduction from the transaction price which is also termed as the revenue by way of contracts but will not shown as deduction if the payment is to be done in relation to a specific or distinct type of good or service.

The non public entity can also use the application of the Practical Expedient in relation to the expected term if the person to whom the share based compensation is being made is having a limited time in order to exercise the award and he is also not engaged in the process of providing goods or service and thus the position of customer is being ceased. The measurement of the share based compensation can also be done subsequently by way of application of other guidance in the following cases: first when the grantee had vested in the award given and is thus not providing goods and services, second when the grantee had vested in the award and it is also not considered as the customer of company and the third when the grantee is not considered as the employee of the company.

The modification in the share based compensation will not lead to changes in the terms and conditions of the award if the modification does not lead to any change in the fair value of the share based compensation and the ratio of the intrinsic value of share to the exercise price of the share.

As per the provisions of the subtopic 718-30, stock compensation- classification of awards as liabilities, the non public entity is required to properly measure all the liabilities incurred as a part of the share based award at the fair value.

2. Comparison with the current theory and standards. 

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