9.1 Overview
ASC 718-10
General
05-1 The Compensation — Stock
Compensation Topic provides guidance on share-based payment
transactions. This Topic includes the following
Subtopics:
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Overall
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Awards Classified as Equity
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Awards Classified as Liabilities
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Employee Stock Ownership Plans
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Employee Stock Purchase Plans
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Income Taxes.
05-2 This Topic provides guidance
for employee and nonemployee share-based payment
transactions.
05-3 This Subtopic provides general
guidance related to share-based payment arrangements. This
Subtopic and Subtopics 718-20 and 718-30 are interrelated
and the required guidance may be located in either this
Subtopic or one of the other Subtopics. In general, material
that relates to both equity and liability instruments is
included in this Subtopic, while material more specifically
related to either equity or liability instruments is
included in their respective Subtopics. Guidance referencing
grantees is intended to be applicable to recipients of both
employee and nonemployee awards, and guidance referencing
employees or nonemployees is only applicable to those
specific types of awards.
General
10-1 The objective of accounting
for transactions under share-based payment arrangements is
to recognize in the financial statements the goods or
services received in exchange for equity instruments granted
or liabilities incurred and the related cost to the entity
as those goods or services are received. This Topic uses the
terms compensation and payment in their
broadest senses to refer to the consideration paid for goods
or services or the consideration paid to a customer.
10-2 This Topic requires that the
cost resulting from all share-based payment transactions be
recognized in the financial statements. This Topic
establishes fair value as the measurement objective in
accounting for share-based payment arrangements and requires
all entities to apply a fair-value-based measurement method
in accounting for share-based payment transactions except
for equity instruments held by employee stock ownership
plans.
The objectives of accounting for share-based payment arrangements are the same
for nonemployees as they are for employees; therefore, the guidance on nonemployee
awards is largely aligned with that on employee awards. However, there are some
significant differences, two of which are as follows:
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Attribution — Any cost associated with nonemployee awards is recognized under other applicable accounting guidance as though the grantor paid cash. That is, ASC 718 does not prescribe the period(s) or the manner (i.e., capitalize or expense) in which nonemployee share-based payments will be recognized. Rather, an entity should recognize an asset or expense (or reverse a previously recognized cost) in the same period(s) and in the same manner as though the entity had paid cash for the goods or services. By contrast, any compensation cost associated with employee awards is generally recognized on a ratable basis over the requisite service period (or over multiple requisite service periods).
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Contractual term — Nonemployee awards of stock options and similar instruments are measured by using the expected term, but the contractual term may be elected as the expected term on an award-by-award basis. By contrast, all employee awards of stock options and similar instruments are measured by using an estimate of the expected term.