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Stock comp payments: navigating ASC 718

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Overhead View of Hand Filling Up Tax Form and Using Calculator and Laptop The overarching principle of ASC 718, which codifies the guidance on accounting for share-based arrangements, is to account for the fair value of employee and nonemployee awards as compensation expense in the financial statements. The guidance in ASC 718 applies to all entities that receive services from employees or services or goods from nonemployees in exchange for share-based payment awards.

ASU 2018-07, Improvements to Nonemployee Share-Based Payment Accounting, simplifies the accounting for nonemployee awards by expanding the scope of ASC 718 to include share-based payment transactions involving nonemployees. The amendments in ASU 2018-17 supersede the guidance in ASC 505-50, Equity-Based Payments to Non-Employees, and mostly align the accounting for nonemployee awards with the existing accounting model for employee awards.

The amendments are effective in 2019 for calendar-year public business entities and in 2020 for nonpublic entities. This updated edition of the guide incorporates the accounting guidance for share-based payments under ASC 718 for nonemployee awards after an entity adopts the amendments in ASU 2018-07, including the changes to the accounting framework, terminology, and definitions in ASC 718.

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