In the context of stock compensation under FIN 44, variable accounting applies to grants of certain types of performance-based awards that are not a "fixed expense" under APB 25
. FAS 123(R)
(now called ASC Topic 718
) uses the term "liability accounting" instead of "variable accounting."
Variable accounting occurs when, at grant, the exercise price or the certainty of receiving a stock award is based on varying conditions, such as with indexed options or performance share plans. The grant is then expensed against company earnings in each quarter on its "in the money" value.