Executive Summary
In March 2024, the Financial Accounting Standards Board (FASB) issued ASU 2024-01, which clarifies the accounting treatment of profits interest awards. This move aims to enhance the consistency and understanding of Generally Accepted Accounting Principles (GAAP) related to such awards. The ASU update helps entities ascertain whether certain awards need to be measured at fair value under ASC 718 or if they should be accounted for under other guidance. In this article, we summarize the new FASB guidance and discuss common methods for valuing profits interests under ASC 718.