14.3 Scope
ASC 718-10
Transactions
15-3 The guidance
in the Compensation — Stock Compensation Topic applies to all
share-based payment transactions in which a grantor acquires
goods or services to be used or consumed in the grantor’s own
operations or provides consideration payable to a customer by
issuing (or offering to issue) its shares, share options, or
other equity instruments or by incurring liabilities to an
employee or a nonemployee that meet either of the following
conditions:
- The amounts are based, at least in part, on the price of the entity’s shares or other equity instruments. (The phrase at least in part is used because an award of share-based compensation may be indexed to both the price of an entity’s shares and something else that is neither the price of the entity’s shares nor a market, performance, or service condition.)
- The awards require or may require settlement by issuing the entity’s equity shares or other equity instruments.
Pending Content (Transition Guidance: ASC
718-10-65-17)
15-3 The guidance in the Compensation —
Stock Compensation Topic applies to all
share-based payment transactions in which a
grantor acquires goods or services to be used or
consumed in the grantor’s own operations or
provides consideration payable to a customer by
either of the following:
- Issuing (or offering to issue) its shares, share options, or other equity instruments to an employee or a nonemployee
- Incurring liabilities to an employee or a
nonemployee that meet either of the following
conditions:
- The amounts are based, at least in part, on the price of the entity’s shares or other equity instruments. (The phrase at least in part is used because an award of share-based compensation may be indexed to both the price of an entity’s shares and something else that is neither the price of the entity’s shares nor a market, performance, or service condition.)
- The awards require or may require settlement by issuing the entity’s equity shares or other equity instruments.
15-5A Share-based
payment awards granted to a customer shall be measured and
classified in accordance with the guidance in this Topic (see
paragraph 606-10-32-25A) and reflected as a reduction of the
transaction price and, therefore, of revenue in accordance with
paragraph 606-10-32-25 unless the consideration is in exchange
for a distinct good or service. If share-based payment awards
are granted to a customer as payment for a distinct good or
service from the customer, then an entity shall apply the
guidance in paragraph 606-10-32-26.
Pending Content (Transition
Guidance: ASC 606-10-65-2)
15-5A
Share-based consideration granted to a customer
(or to other parties that purchase the grantor’s
goods or services from the customer) shall be
measured and classified in accordance with the
guidance in this Topic (see paragraph
606-10-32-25A) and reflected as a reduction of the
transaction price and, therefore, of revenue in
accordance with paragraph 606-10-32-25 unless the
consideration is in exchange for a distinct good
or service. If share-based payment awards are
granted to a customer as payment for a distinct
good or service from the customer, then the
grantor shall apply the guidance in paragraph
606-10-32-26. See also paragraph
606-10-55-88AB.
15-5B
A grantor shall not apply by analogy the aspects
of the definition of performance condition that
are specific to share-based consideration payable
to a customer described in paragraph
606-10-55-88AA to awards granted to employees or
nonemployees in which the grantor acquires goods
or services to be used or consumed in the
grantor’s own operations that are solely within
the scope of the guidance in this Topic. See also
paragraphs 606-10-55-88AB through 55-88AC.
ASC 606-10
32-25 Consideration payable to a
customer includes:
- Cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity’s goods or services from the customer)
- Credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to the entity (or to other parties that purchase the entity’s goods or services from the customer)
- Equity instruments (liability or equity classified) granted in conjunction with selling goods or services (for example, shares, share options, or other equity instruments).
An entity shall account for consideration payable to a customer
as a reduction of the transaction price and, therefore, of
revenue unless the payment to the customer is in exchange for a
distinct good or service (as described in paragraphs
606-10-25-18 through 25-22) that the customer transfers to the
entity. If the consideration payable to a customer includes a
variable amount, an entity shall estimate the transaction price
(including assessing whether the estimate of variable
consideration is constrained) in accordance with paragraphs
606-10-32-5 through 32-13.
Pending Content (Transition
Guidance: ASC 606-10-65-2)
32-25
Consideration payable to a customer includes:
- Cash amounts that an entity pays, or expects to pay, to the customer (or to other parties that purchase the entity’s goods or services from the customer)
- Credit or other items (for example, a coupon or voucher) that can be applied against amounts owed to the entity (or to other parties that purchase the entity’s goods or services from the customer)
- Share-based consideration (liability or equity classified) granted to the customer (or to other parties that purchase the grantor’s goods or services from the customer) in conjunction with selling goods or services. Share-based consideration encompasses the same instruments as share-based payment arrangements (for example, shares, cash-settled stock appreciation rights, share options and warrants, or other equity instruments), but the grantee (as a customer) need not be a supplier of goods or services to the grantor.
An entity shall account for
consideration payable to a customer as a reduction
of the transaction price and, therefore, of
revenue unless the payment to the customer is in
exchange for a distinct good or service (as
described in paragraphs 606-10-25-18 through
25-22) that the customer transfers to the entity.
If the consideration payable to a customer (other
than share-based consideration) includes a
variable amount, an entity shall estimate the
transaction price (including assessing whether the
estimate of variable consideration is constrained)
in accordance with paragraphs 606-10-32-5 through
32-13. See paragraph 606-10-32-25A for guidance
applicable to share-based consideration payable to
a customer.
Share-based consideration payable to a customer is treated as
consideration payable to a customer under ASC 606. Accordingly, it is recognized as a
reduction of the transaction price and, therefore, of revenue unless it represents a
fair value payment for a distinct good or service. While share-based consideration
payable to a customer is accounted for as a reduction of revenue, the share-based
payment is measured and classified (e.g., equity or liability) in accordance with ASC
718.
Connecting the Dots
ASC 718 applies to share-based consideration payable to a
customer under ASC 606 but does not directly address similar equity-based
incentives issued by a lessor to a lessee under ASC 842.1
Footnotes
1
See paragraph BC17 of ASU 2019-08.