This guide for Accounting for stock compensation assists companies in understanding and analyzing the accounting for share-based payments with employees and nonemployees under FASB Accounting Standards Codification (ASC) 718, “Compensation—Stock Compensation.” ASC 718 addresses the accounting for various types of equity-based awards issued as compensation for goods or services, and includes stock options, restricted stock, restricted stock units, stock appreciation rights, phantom stock and profits interests, as well as any other awards based at least in part on the value of an entity’s equity.
Our comprehensive guide includes in-depth discussion and examples on:
- The scope of ASC 718
- The measurement of awards – including the measurement basis, grant date determination and effect of market, performance and service conditions on measurement of compensation cost
- Various aspects of the recognition of compensation cost – including the requisite service period and nonemployee vesting period, service and performance conditions that affect vesting, service inception date determination, accounting for forfeitures, graded vesting employee awards, early exercise of stock options, dividends on share-based payments, capitalization of compensation costs and clawback features
- The classification and accounting for liability awards – including when awards require liability classification, and the measurement objective and measurement date for liability-classified awards
- The estimation of fair value for stock compensation awards – including fair value at grant date, as well as describing valuation techniques
- Accounting for modifications – including modifications that change an award’s classification, inducements, equity restructurings, repurchases or cancellations of equity awards, cancellation and replacement of awards of equity instruments and modifications of an award when the holder is no longer providing service
The guide also contains numerous examples in the appendices. The guide does not address the income tax and earnings per share effect of share-based payments, nor does it address the accounting for employee stock ownership plans or employee share purchase plans.