Share-based payment awards

ASC 718 reporting standard

To incentivize employee performance and align the interests of employees and shareholders, entities often grant share-based payment awards—including stock options, restricted stock, restricted stock units (RSUs), stock appreciation rights (SARs), and other equity-based instruments—in exchange for services. Entities may also incur liabilities that are based, at least in part, on the price of their shares or other equity instruments or that require or may require settlement by issuing their equity shares or other instruments. To a lesser extent, entities also grant such awards to compensate vendors for goods and services or as sales incentives to customers.
ASC 718 provides the accounting guidance on share-based payment awards, which requires entities to use a fair-value-based measure when recognizing the cost associated with these awards in the financial statements. Some of the more challenging aspects of applying this guidance are highlighted below.

Continue your share-based payment awards learning

Deloitte’s Roadmap Share-Based Payment Awards provides a comprehensive discussion of the accounting guidance on share-based payment arrangements in ASC 718.

1 Compared with the recovery provisions of Section 304 of the Sarbanes-Oxley Act of 2002 that (1) are triggered when an accounting restatement results from an issuer’s misconduct and (2) only apply to CEOs and CFOs, the final rule’s scope includes a broader list of executive officers, including former executive officers.
2 Cheap stock refers to issuances of equity securities before an IPO in which the value of the shares is below the IPO price.

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Sean May Partner Deloitte & Touche LLP +1 415 783 6930

Ashley Carpenter Senior Consultation Partner Audit & Assurance +1 203 761 3197