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Chapter 5 — Subsequent Measurement

5.3 Share-Based Compensation Granted by an Investor to Employees or Nonemployees of an Equity Method Investee

5.3 Share-Based Compensation Granted by an Investor to Employees or Nonemployees of an Equity Method Investee

ASC 323-10
Share-Based Compensation Granted to Employees and Nonemployees of an Equity Method Investee
25-3 Paragraphs 323-10-25-4 through 25-6 provide guidance on accounting for share-based payment awards granted by an investor to employees or nonemployees of an equity method investee that provide goods or services to the investee that are used or consumed in the investee’s operations when no proportionate funding by the other investors occurs and the investor does not receive any increase in the investor’s relative ownership percentage of the investee. That guidance assumes that the investor’s grant of share-based payment awards to employees or nonemployees of the equity method investee was not agreed to in connection with the investor’s acquisition of an interest in the investee. That guidance applies to share-based payment awards granted to employees or nonemployees of an investee by an investor based on that investor’s stock (that is, stock of the investor or other equity instruments indexed to, and potentially settled in, stock of the investor).
25-4 In the circumstances described in paragraph 323-10-25-3, a contributing investor shall expense the cost of share-based payment awards granted to employees and nonemployees of an equity method investee as incurred (that is, in the same period the costs are recognized by the investee) to the extent that the investor’s claim on the investee’s book value has not been increased.
25-5 In the circumstances described in paragraph 323-10-25-3, other equity method investors in an investee (that is, noncontributing investors) shall recognize income equal to the amount that their interest in the investee’s net book value has increased (that is, their percentage share of the contributed capital recognized by the investee) as a result of the disproportionate funding of the compensation costs. Further, those other equity method investors shall recognize their percentage share of earnings or losses in the investee (inclusive of any expense recognized by the investee for the share-based compensation funded on its behalf).
25-6 Example 2 (see paragraph 323-10-55-19) illustrates the application of this guidance for share-based compensation granted to employees of an equity method investee.
Share-Based Compensation Granted to Employees and Nonemployees of an Equity Method Investee
30-3 Share-based compensation cost recognized in accordance with paragraph 323-10-25-4 shall be measured initially at fair value in accordance with Topic 718. Example 2 (see paragraph 323-10-55-19) illustrates the application of this guidance.
Example 2 in ASC 323-10-55-19 through 55-26 illustrates the accounting for stock compensation granted by an investor to employees of an equity method investee: