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Perspectives

A roadmap to accounting for share-based payment awards

This roadmap provides Deloitte’s insights into and interpretations of the guidance on share-based payment arrangements in ASC 718 (employee and nonemployee awards) and ASC 505-50 (nonemployee awards before the adoption of ASU 2018-07) as well as in other literature (e.g., ASC 260 and ASC 805). The guidance in the 2020 edition of the Roadmap has been updated to reflect ASU 2019-08.

We are pleased to present the 2020 edition of A Roadmap to Accounting for Share-Based Payment Awards. This Roadmap provides Deloitte’s insights into and interpretations of the guidance on share-based payment arrangements in ASC 7181 (employee and nonemployee awards) as well as in other literature (e.g., ASC 260 and ASC 805).

In June 2018 the FASB issued ASU 2018-07, which simplifies the accounting for share-based payments granted to nonemployees for goods and services. ASU 2018-07 aligns most of the guidance on nonemployee share-based payment awards with the requirements for employee share-based payment awards. Before adopting ASU 2018-07, entities used ASC 505-50 to account for share-based payment awards issued to nonemployees in exchange for goods or services. Accordingly, the ASU supersedes ASC 505-50 and expands the scope of ASC 718 to include all share-based payment arrangements related to the acquisition of goods and services from both nonemployees and employees.

It is assumed in this Roadmap that an entity has adopted ASU 2018-07. The changes to the accounting framework introduced by ASU 2018-07 are reflected throughout the Roadmap to align with the revised terminology and definitions in ASC 718. Chapter 9 addresses the accounting for nonemployee awards to the extent that it is different from the accounting for employee awards discussed throughout the Roadmap. Sections 9.1 through 9.10 are intended for entities that have adopted ASU 2018-07. However, Sections 9.11 through 9.21 continue to reflect the guidance an entity would apply before adopting ASU 2018-07.

In November 2019, the FASB issued ASU 2019-08, which clarifies the accounting for share-based payments issued as consideration payable to a customer under ASC 606. Under the ASU, entities apply the guidance in ASC 718 to measure and classify share-based payments issued to a customer that are not in exchange for a distinct good or service (i.e., share-based sales incentives).

The guidance in the Roadmap has been updated to reflect ASU 2019-08. However, the discussion of share-based-payments issued as sales incentives to customers is primarily included in Chapter 14. Section 9.2.1 provides guidance for entities that have not adopted ASU 2019-08.

For readers reporting under IFRS® Standards, we have updated Appendix A, which summarizes some of the significant differences between ASC 718 and IFRS 2 in the accounting for share-based payment awards. For a summary of all the substantive changes made to the Roadmap since our issuance of the previous edition, see Appendix D.

1. For the full titles of standards, topics, regulations, and abbreviations used in this publication, see Appendixes B and C. Note that this Roadmap does not cover the guidance on employee stock ownership plans in ASC 718-40.

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