Navigating ASC 718’s employee stock compensation guidance

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This Grant Thornton guide, Share-based payments: Navigating the guidance in ASC 718, presents accounting guidance on employee share-based arrangements codified in ASC 718, Compensation – Stock Compensation. The guidance in ASC 718 stems primarily from Statement 123(R), Share-Based Payment, issued in 2004, as amended by ASU 2016-09 and ASU 2017-09.

The overarching principle of ASC 718 is to account for the fair value of employee awards as compensation expense in the financial statements. ASC 718 applies to all entities that enter into share-based transactions with their employees, where employee services are exchanged for issued equity instruments or for incurred liabilities. The applicable compensation either must be for an amount based, at least partly, on the price of the entity’s shares or other equity instruments, or the compensation requires, or could require, a settlement through issuing the entity’s shares or other similar instruments.

Grant Thornton’s guide provides a sound general summary of ASC 718 that business leaders can use as a reference when discussing the proper application of its provisions with trained professional advisers.

Douglas Reynolds
Partner, Accounting Principles Group
T +1 617 848 4877

Sheri Fabian
Partner, Accounting Principles Group
T +1 732 516 5543