America Online 2014 Annual Report Download - page 77

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AOL INC.
PART II—ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
determining which transition method we will utilize in order to apply the new standard. We are also still
assessing what effect the application of this standard may have on the timing of our revenue recognition and our
financial statements.
Share-based Payments
In June 2014, new guidance was issued related to the accounting for share-based payments when the terms
of an award provide that a performance target could be achieved after the requisite service period. Existing share
based payment guidance does not specify whether an employee must be rendering service when a performance
target is achieved in order to qualify for treatment as a performance consideration. This can result in significant
differences in the amount and timing of the recognition of compensation expense amongst entities. Under the
new standard, a performance target that could be achieved after the requisite service period should be treated as a
performance condition that affects vesting, rather than a condition that affects the grant-date fair value. If it is not
probable that the performance target will be achieved prior to the end of the requisite service period,
compensation cost would be recognized when the achievement of the performance condition is considered
probable, which may be after the end of the requisite service period.
The standard is effective for annual periods beginning after December 15, 2015. Early adoption is
permitted. This new guidance will become effective for us in January 2016. Typically, our share-based
arrangements that have both service and performance vesting conditions have service periods that coincide with
the performance periods. As such, we do not expect the new guidance to have a material impact on our
accounting for share-based awards.
Consolidation
In February 2015, new guidance was issued related to the considerations made when determining whether
an entity should be consolidated. The new guidance modifies the evaluation of whether limited partnerships and
similar legal entities are variable interest entities (“VIEs”) or voting interest entities; eliminates the presumption
that a general partner should consolidate a limited partnership; and affects the consolidation analysis of reporting
entities that are involved with VIEs, particularly those that have fee arrangements and related party relationships.
This new guidance will require a reassessment of whether certain business relationships qualify for consolidation
under the voting interest and VIE model.
The standard is effective for annual periods beginning after December 15, 2015. Early adoption is
permitted. This new guidance will become effective for us in January 2016. We do not expect the new guidance
to have a material impact on how we evaluate entities for consolidation.
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