- US GAAP
ASC 718 comprises six Subtopics, below is an overview of each Subtopic.
ASC 718-10 notes that it “provides general guidance related to share-based payment arrangements with employees.”
ASC 718-20 notes that it provides guidance for share-based payment awards that are classified as equity. It also notes that it is “interrelated with Subtopic 718-10, which contains guidance applicable to instruments classified as either equity or liabilities issued in share-based payment transactions.”
ASC 718-30 notes that it provides guidance for share-based payment awards that are classified as liability, but it is also interrelated to ASC 718-10 that contains guidance on awards classified as liabilities and equity.
ASC 718-40 includes guidance on employee stock ownership plans and notes the following purposes for entities using these plans:
- To fund a matching program for a sponsor’s 401(k) saving plan, formula-based profit-sharing plan, and other employee benefits
- To raise new capital or to create a marketplace for the existing stock
- To replace lost benefits from the termination of other retirement plans or provide benefits under postretirement benefit plans, particularly medical benefits
- To be part of the financing package in leveraged buy-outs
- To provide a tax-advantaged means for owners to terminate their ownership
- To be part of a long-term program to restructure the equity section of a plan sponsor’s balance sheet
- To defend the entity against hostile takeovers.
ASC 718-50 notes that it provides guidance to entities that have employee share purchase plans, but entities “must first determine whether the plan is compensatory or noncompensatory.”
ASC 718-740 notes the following:
This Subtopic addresses the accounting for current and deferred income taxes that results from share-based payment arrangements, including employee stock ownership plans.
This Subtopic specifically addresses the accounting requirements that apply to the following:
- The determination of the basis differences which result from tax deductions arising in different amounts and in different periods from compensation cost recognized in financial statements
- The recognition of tax benefits when tax deductions differ from recognized compensation cost
- The presentation required for income tax benefits from share-based payment arrangements.