A Roadmap to Accounting for Share-Based Payment Awards

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).

In June 2018 the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. Under the ASU, most of the guidance on share-based payments granted to nonemployees is aligned with the requirements for share-based payments granted to employees. Accordingly, the ASU supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees.

For public business entities, the amendments in ASU 2018-07 are effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted if financial statements have not yet been issued (for public business entities) or have not yet been made available for issuance (for all other entities), but no earlier than an entity’s adoption date of ASC 606. If early adoption is elected, all amendments in the ASU that apply must be adopted in the same period. In addition, if early adoption is elected in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. Because ASU 2018-07 eliminates most of the complexity of applying ASC 505-50 to nonemployee awards, many entities have chosen to adopt the ASU early.

To reflect changes to the accounting framework introduced by ASU 2018-07, we have updated the terminology throughout the Roadmap to align with the revised terminology and definitions in ASC 718. In addition, we have updated the Roadmap’s Chapter 9, which discusses nonemployee awards. Chapter 9 addresses the accounting for nonemployee awards to the extent that it is different from the accounting for employee awards discussed throughout the Roadmap. Sections 9.1 through 9.10 are intended for entities that have adopted ASU 2018-07. However, Sections 9.11 through 9.21 continue to reflect the guidance an entity would apply before adopting ASU 2018-07 (see Appendix B for more information about interim adoption of the ASU).

In addition, the FASB in November 2019 issued ASU 2019-08, which clarifies the accounting for share-based payments issued as consideration payable to a customer under ASC 606. Under the ASU, entities measure and classify share-based consideration payable to a customer by applying the guidance in ASC 718. The effective date of the ASU depends on whether an entity has previously adopted ASU 2018-07. For entities that have not yet adopted ASU 2018-07, the effective date differs for PBEs and all other entities. For PBEs, the amendments in the ASU are effective for fiscal years beginning after December 15, 2019, including interim periods therein. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020 (the same adoption date as that in ASU 2018-07). For entities that have already adopted ASU 2018-07, the amendments in the final ASU are effective for fiscal years beginning after December 15, 2019, including interim periods therein. Early adoption is permitted for all entities, but not earlier than an entity’s adoption date of ASU 2018-07. Other than in the discussions in Section 9.2.1 and Appendix C, the guidance in the Roadmap has not been updated to reflect ASU 2019-08.

For readers reporting under IFRS® Standards, we have updated Appendix A (formerly Appendix D), which summarizes some of the significant differences between ASC 718 and IFRS 2 in the accounting for share-based payment awards. For a summary of all the substantive changes made to the Roadmap since our issuance of the previous edition, see Appendix F.