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To incentivize employee performance and align the interests of employees and shareholders, entities often grant share-based payment awards — including stock options, restricted stock, restricted stock units, stock appreciation rights, and other equity-based instruments — in exchange for services. To a lesser extent, entities also grant such awards to compensate vendors for goods and services or as sales incentives to customers. ASC 718 provides the accounting guidance on share-based payment awards, which requires entities to use a fair-value-based measure when recognizing the cost associated with these awards in the financial statements. Some of the more challenging aspects of applying this guidance are addressed in this publication.

This Roadmap provides Deloitte’s insights into and interpretations of the guidance on share-based payment arrangements in ASC 718 (employee and nonemployee awards) and ASC 505-50 (nonemployee awards before the adoption of ASU 2018-07) as well as in other literature (e.g., ASC 260 and ASC 805).

The AICPA’s Auditing Standards Board has published Statement on Auditing Standards (SAS) No. 148, “Amendment to AU-C Section 935, amends AU-C section 935, Compliance Audits.”

The SEC has approved PCAOB Release No. 2022-002, “Planning and Supervision of Audits Involving Other Auditors and Dividing Responsibility for the Audit With Another Accounting Firm.”