Chapter 7 — Liability-Classified Awards

This chapter discusses the accounting for share-based payment awards for which liability classification is required under ASC 718. Unlike equity-classified awards, liability-classified awards must be remeasured at the end of each reporting period until settlement. By contrast, equity-classified awards are measured at their fair-value-based amount (or, for nonpublic entities, at a calculated value if a fair-value-based measure is not reasonably estimable) on the grant date (i.e., the award’s fair-value-based measure is fixed on the grant date). In addition, because the measurement date for liability-classified awards is the settlement date, the related income tax effects are remeasured at the end of each reporting period until settlement.