1.3 Scope
ASC 718 generally applies to share-based payments granted to (1) employees or
nonemployees in exchange for goods or services to be used or consumed in the
grantor’s own operations or (2) customers of the entity.3 Further, such payments must be either (1) settled by issuing the entity’s
equity shares or other equity instruments or (2) indexed, at least in part, to the
value of the entity’s equity shares or other equity instruments. See Chapter 2 for a more detailed
discussion of the scope of ASC 718.
In addition, an entity should evaluate transactions between (1) grantees that
provide goods and services or grantees that are customers and (2) related parties or
other economic interest holders of the entity. If a transaction is deemed to be
compensation for goods or services or if the transaction provides consideration to a
customer that is not in exchange for a good or service, it is accounted for as a
capital contribution to the entity and as a share-based payment arrangement between
the entity and the grantee. See Section 2.5
for additional guidance.
Footnotes
3
Share-based payments granted to employees or nonemployees in
exchange for goods or services are discussed throughout this Roadmap.
Share-based payments issued as consideration payable to a customer are
discussed in Chapter
14.