# ASC 718-10-30: Compensation—Stock Compensation — Overall — 30 Initial Measurement

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/718/10/#30-initial-measurement)

Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective.

Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure.

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:f89c073ee0425de0ae3d9d6b6ec7f5ca7291e6144a6a55058a08200c2eca6349

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


## ASC 718-10-30: 30 Initial Measurement

[Read section](https://asc.understandingaccounting.org/asc/718/10/#30-initial-measurement)

SEC content: no

##### [718-10-30-1](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-1)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:fae35ab4023dc65d89dd70629a2d1c73daeee37121c914cca219e1c920700329

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


While some of the material in this Section was written in terms of awards classified as equity, it applies equally to awards classified as liabilities.

#### Fair-Value-Based

##### [718-10-30-2](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-2)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:9e9e18067a6bc14d849517a674bd3558f0a54c75b0f534597301391aac4c826a

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A share-based payment transaction shall be measured based on the [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "The amount at which an asset (or liability) could be bought (or incurred) or sold (or settled) in a current transaction between willing parties, that is, other than in a forced or liquidation sale.") (or in certain situations specified in this Topic, a [calculated value](https://asc.understandingaccounting.org/glossary/c/#calculated-value "A measure of the value of a share option or similar instrument determined by substituting the historical volatility of an appropriate industry sector index for the expected volatility of a nonpublic entity's share price in an option-pricing model.") or [intrinsic value](https://asc.understandingaccounting.org/glossary/i/#intrinsic-value "The amount by which the fair value of the underlying stock exceeds the exercise price of an option. For example, an option with an exercise price of $20 on a stock whose current market price is $25 has an intrinsic value of $5. (A nonvested share may be described as an option on that share with an exercise price of zero. Thus, the fair value of a share is the same as the intrinsic value of such an option on that share.)")) of the equity instruments [issued](https://asc.understandingaccounting.org/glossary/i/#issued-issuance-or-issuing-of-an-equity-instrument "An equity instrument is issued when the issuing entity receives the agreed-upon consideration, which may be cash, an enforceable right to receive cash, or another financial instrument, goods, or services. An entity may conditionally transfer an equity instrument to another party under an arrangement that permits that party to choose at a later date or for a specified time whether to deliver the consideration or to forfeit the right to the conditionally transferred instrument with no further obligation. In that situation, the equity instrument is not issued until the issuing entity has received the consideration. The grant of stock options or other equity instruments subject to vesting conditions is not considered to be issuance.").

##### [718-10-30-3](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-3)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:d95f5fbff2af079dc0a35b2944fe034fdaa1a3e7836aae826eee4bba47cb37cd

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An entity shall account for the compensation cost from [share-based payment transactions](https://asc.understandingaccounting.org/glossary/s/#share-based-payment-transactions "A transaction under a share-based payment arrangement, including a transaction in which an entity acquires goods or services because related parties or other holders of economic interests in that entity awards a share-based payment to an employee or other supplier of goods or services for the entity's benefit. Also called share-based compensation transactions.") in accordance with the fair-value-based method set forth in this Topic. That is, the cost of goods obtained or services received in exchange for [awards](https://asc.understandingaccounting.org/glossary/a/#award "The collective noun for multiple instruments with the same terms and conditions granted at the same time either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to as graded vesting, and different parts of an award may have different expected terms. References to an award also apply to a portion of an award.") of share-based compensation generally shall be measured based on the grant-date fair value of the equity instruments issued or on the fair value of the liabilities incurred. The cost of goods obtained or services received by an entity as consideration for equity instruments issued or liabilities incurred in share-based compensation transactions shall be measured based on the fair value of the equity instruments issued or the liabilities [settled](https://asc.understandingaccounting.org/glossary/s/#settlement-of-an-award "An action or event that irrevocably extinguishes the issuing entity's obligation under a share-based payment award. Transactions and events that constitute settlements include the following: Exercise of a share option or lapse of an option at the end of its contractual term Vesting of shares Forfeiture of shares or share options due to failure to satisfy a vesting condition An entity's repurchase of instruments in exchange for assets or for fully vested and transferable equity instruments. The vesting of a share option is not a settlement because the entity remains obligated to issue shares upon exercise of the option."). The portion of the fair value of an instrument attributed to goods obtained or services received is net of any amount that a grantee pays (or becomes obligated to pay) for that instrument when it is granted. For example, if a grantee pays $5 at the [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") for an option with a grant-date fair value of $50, the amount attributed to goods or services provided by the grantee is $45. An entity shall apply the guidance in paragraph [606-10-32-26](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-26) when determining the portion of the fair value of an equity instrument attributed to goods obtained or services received from a customer.

##### [718-10-30-4](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-4)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:5dc78715def0e63babc63e50970761cd563fe522f94e539703f393c7094ecd62

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


However, this Topic provides certain exceptions (see paragraph [718-10-30-21](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-21)) to that measurement method if it is not possible to reasonably estimate the fair value of an [award](https://asc.understandingaccounting.org/glossary/a/#award "The collective noun for multiple instruments with the same terms and conditions granted at the same time either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to as graded vesting, and different parts of an award may have different expected terms. References to an award also apply to a portion of an award.") at the grant date. A [nonpublic entity](https://asc.understandingaccounting.org/glossary/n/#nonpublic-entity "Any entity other than one that meets any of the following criteria: Has equity securities that trade in a public market either on a stock exchange (domestic or foreign) or in an over-the-counter market, including securities quoted only locally or regionally Makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market Is controlled by an entity covered by the preceding criteria. An entity that has only debt securities trading in a public market (or that has made a filing with a regulatory agency in preparation to trade only debt securities) is a nonpublic entity.") also may choose to measure its liabilities under [share-based payment arrangements](https://asc.understandingaccounting.org/glossary/s/#share-based-payment-arrangements "An arrangement under which either of the following conditions is met: One or more suppliers of goods or services (including employees) receive awards of equity shares, equity share options, or other equity instruments. The entity incurs liabilities to suppliers that meet either of the following conditions: The amounts are based, at least in part, on the price of the entity's shares or other equity instruments. (The phrase at least in part is used because an award may be indexed to both the price of the entity's shares and something other than either the price of the entity's shares or a market, performance, or service condition.) The awards require or may require settlement by issuance of the entity's shares. The term shares includes various forms of ownership interest that may not take the legal form of securities (for example, partnership interests), as well as other interests, including those that are liabilities in substance but not in form. Equity shares refers only to shares that are accounted for as equity. Also called share-based compensation arrangements.") at intrinsic value (see paragraphs [718-10-30-20](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20) and [718-30-30-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-2)).

##### [718-10-30-5](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-5)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:ad6178ce877ccdd0837bbbf8a386ec917684b726ca828cfaf3f19d2167f57355

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The [terms of a share-based payment award](https://asc.understandingaccounting.org/glossary/t/#terms-of-a-share-based-payment-award "The contractual provisions that determine the nature and scope of a share-based payment award. For example, the exercise price of share options is one of the terms of an award of share options. As indicated in paragraph 718-10-25-15, the written terms of a share-based payment award and its related arrangement, if any, usually provide the best evidence of its terms. However, an entity's past practice or other factors may indicate that some aspects of the substantive terms differ from the written terms. The substantive terms of a share-based payment award, as those terms are mutually understood by the entity and a party (either an employee or a nonemployee) who receives the award, provide the basis for determining the rights conveyed to a party and the obligations imposed on the issuer, regardless of how the award and related arrangement, if any, are structured. See paragraph 718-10-30-5.") and any related arrangement affect its value and, except for certain explicitly excluded features, such as a [reload feature](https://asc.understandingaccounting.org/glossary/r/#reload-feature-and-reload-option "A reload feature provides for automatic grants of additional options whenever a grantee exercises previously granted options using the entity's shares, rather than cash, to satisfy the exercise price. At the time of exercise using shares, the grantee is automatically granted a new option, called a reload option, for the shares used to exercise the previous option."), shall be reflected in determining the fair value of the equity or liability instruments granted. For example, the fair value of a substantive option structured as the exchange of equity shares for a nonrecourse note will differ depending on whether the grantee is required to pay nonrefundable interest on the note.

#### Measurement Objective—Fair Value at Grant Date

##### [718-10-30-6](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-6)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:8c70fd0b7eacf7ee7921e70535379256678567552a0f4439a8791578ccb747b4

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The measurement objective for equity instruments awarded to grantees is to estimate the fair value at the grant date of the equity instruments that the entity is obligated to issue when grantees have delivered the good or rendered the service and satisfied any other conditions necessary to earn the right to benefit from the instruments (for example, to exercise share options). That estimate is based on the share price and other pertinent factors, such as expected [volatility](https://asc.understandingaccounting.org/glossary/v/#volatility "A measure of the amount by which a financial variable such as a share price has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. Volatility also may be defined as a probability-weighted measure of the dispersion of returns about the mean. The volatility of a share price is the standard deviation of the continuously compounded rates of return on the share over a specified period. That is the same as the standard deviation of the differences in the natural logarithms of the stock prices plus dividends, if any, over the period. The higher the volatility, the more the returns on the shares can be expected to vary—up or down. Volatility is typically expressed in annualized terms."), at the grant date.

##### [718-10-30-7](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-7)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:a38bf5be0c864db50be178824a52e42fd3d12d05f8af14653537df63909a76a6

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The fair value of an equity [share option](https://asc.understandingaccounting.org/glossary/s/#share-option "A contract that gives the holder the right, but not the obligation, either to purchase (to call) or to sell (to put) a certain number of shares at a predetermined price for a specified period of time.") or similar instrument shall be measured based on the observable market price of an option with the same or similar terms and conditions, if one is available (see paragraph [718-10-55-10](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-10)).

##### [718-10-30-8](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-8)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:14c7c35688447826e8371984dd94e1d026a149cd88ffab4ffd317f728993052e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Such market prices for equity share options and similar instruments granted in share-based payment transactions are frequently not available; however, they may become so in the future.

##### [718-10-30-9](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-9)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:9def8103631ba85642bd85ba7a96aad9d171255d2cd0024282d06c21ca6998f6

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


As such, the fair value of an equity share option or similar instrument shall be estimated using a valuation technique such as an option-pricing model. For this purpose, a similar instrument is one whose fair value differs from its intrinsic value, that is, an instrument that has [time value](https://asc.understandingaccounting.org/glossary/t/#time-value "The portion of the fair value of an option that exceeds its intrinsic value. For example, a call option with an exercise price of $20 on a stock whose current market price is $25 has intrinsic value of $5. If the fair value of that option is $7, the time value of the option is $2 ($7 - $5)."). For example, a share appreciation right that requires net settlement in equity shares has time value; an equity share does not. Paragraphs

[718-10-55-4 through 55-47](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-4)

provide additional guidance on estimating the fair value of equity instruments, including the factors to be taken into account in estimating the fair value of equity share options or similar instruments as described in paragraphs

[718-10-55-21 through 55-22](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-21)

.

#### Factors or Restrictions That Impact the Determination of Fair Value at Grant Date

##### [718-10-30-10](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:48016ac0fe2d6ca0e26c3c6b62e9670f53b2eeacdf76d3f539e44aaafc5b466f

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


To satisfy the measurement objective in paragraph [718-10-30-6](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-6), the restrictions and conditions inherent in equity instruments awarded are treated differently depending on whether they continue in effect after the [requisite service period](https://asc.understandingaccounting.org/glossary/r/#requisite-service-period "The period or periods during which an employee is required to provide service in exchange for an award under a share-based payment arrangement. The service that an employee is required to render during that period is referred to as the requisite service. The requisite service period for an award that has only a service condition is presumed to be the vesting period, unless there is clear evidence to the contrary. If an award requires future service for vesting, the entity cannot define a prior period as the requisite service period. Requisite service periods may be explicit, implicit, or derived, depending on the terms of the share-based payment award.") or the nonemployee's vesting period. A [restriction](https://asc.understandingaccounting.org/glossary/r/#restriction "A contractual or governmental provision that prohibits sale (or substantive sale by using derivatives or other means to effectively terminate the risk of future changes in the share price) of an equity instrument for a specified period of time.") that continues in effect after an entity has issued awards, such as the inability to transfer vested equity share options to third parties or the inability to sell vested shares for a period of time, is considered in estimating the fair value of the instruments at the grant date. For equity share options and similar instruments, the effect of nontransferability (and nonhedgeability, which has a similar effect) is taken into account by reflecting the effects of grantees' expected exercise and postvesting termination behavior in estimating fair value (referred to as an option's expected term).

##### [718-10-30-10A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10A)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:d928f1dedd8d4c81f95b10e57a903c478405298a3487ef9bb4234ae29acef5e3

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


On an award-by-award basis, an entity may elect to use the contractual term as the expected term when estimating the fair value of a nonemployee award to satisfy the measurement objective in paragraph [718-10-30-6](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-6). Otherwise, an entity shall apply the guidance in this Topic in estimating the expected term of a nonemployee award, which may result in a term less than the contractual term of the award.

##### [718-10-30-10B](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10B)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:c09710a3cbbbe128e1742ed92b41980078d2c723da846aefccc4ec207c7432b2

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


When a nonpublic entity chooses to measure a nonemployee share-based payment award by estimating its expected term and applies the practical expedient in paragraph [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A), it must apply the practical expedient to all nonemployee awards that meet the conditions in paragraph [718-10-30-20B](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20B). However, a nonpublic entity may still elect, on an award-by-award basis, to use the contractual term as the expected term as described in paragraph [718-10-30-10A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10A).

##### [718-10-30-11](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-11)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:a74a233b03a570306a5b6acf210e3ce23bae28563126e78a6ef0c78bf65deff1

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A restriction that stems from the forfeitability of instruments to which grantees have not yet earned the right, such as the inability either to exercise a nonvested equity share option or to sell [nonvested shares](https://asc.understandingaccounting.org/glossary/n/#nonvested-shares "Shares that an entity has not yet issued because the agreed-upon consideration, such as the delivery of specified goods or services and any other conditions necessary to earn the right to benefit from the instruments, has not yet been satisfied. Nonvested shares cannot be sold. The restriction on sale of nonvested shares is due to the forfeitability of the shares if specified events occur (or do not occur)."), is not reflected in estimating the fair value of the related instruments at the grant date. Instead, those restrictions are taken into account by recognizing compensation cost only for awards for which grantees deliver the good or render the service.

##### [718-10-30-12](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-12)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:05be0688d1ded783867157d5b31a90a4abd2bf6309ee8456c6750aab337e420c

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Awards of share-based compensation ordinarily specify a [performance condition](https://asc.understandingaccounting.org/glossary/p/#performance-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).(P) December 16, 2026; (N) December 16, 2026606-10-65-2For share-based payments in which a grantor acquires goods or services to be used or consumed in the grantor’s own operations, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to both of the following: Rendering service or delivering goods for a specified (either explicitly or implicitly) period of time Achieving a specified performance target that is defined solely by reference to the grantor's own operations (or activities) or by reference to the grantee's performance related to the grantor's own operations (or activities).Attaining a specified growth rate in return on assets, obtaining regulatory approval to market a specified product, selling shares in an initial public offering or other financing event, and a change in control are examples of performance conditions. A performance target also may be defined by reference to the same performance measure of another entity or group of entities. For example, attaining a growth rate in earnings per share (EPS) that exceeds the average growth rate in EPS of other entities in the same industry is a performance condition. A performance target might pertain to the performance of the entity as a whole or to some part of the entity, such as a division, or to the performance of the grantee if such performance is in accordance with the terms of the award and solely relates to the grantor's own operations (or activities).For share-based consideration payable to a customer that can result in a reduction of the transaction price in accordance with Topic 606, a condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that relates to any of the following:Achieving a specified performance target that is defined solely by reference to the grantor’s own operations (or activities) or by reference to the grantee’s (the customer’s) performance related to the grantor’s own operations (or activities)The grantee’s purchase (or potential purchase) of the grantor’s goods or services from either the grantor or the grantor’s customersA purchase (or potential purchase) of the grantor’s goods or services from either the grantee or the grantee’s customers.The performance targets listed in this definition for employee and nonemployee awards (for example, a change in control) are also examples of performance conditions for share-based consideration payable to a customer.") or a [service condition](https://asc.understandingaccounting.org/glossary/s/#service-condition "A condition affecting the vesting, exercisability, exercise price, or other pertinent factors used in determining the fair value of an award that depends solely on an employee rendering service to the employer for the requisite service period or a nonemployee delivering goods or rendering services to the grantor over a vesting period. A condition that results in the acceleration of vesting in the event of a grantee's death, disability, or termination without cause is a service condition.") (or both) that must be satisfied for a grantee to earn the right to benefit from the award. No compensation cost is recognized for instruments forfeited because a service condition or a performance condition is not satisfied (for example, instruments for which the good is not delivered or the service is not rendered). Examples 1 through 2 (see paragraphs

[718-20-55-4 through 55-40](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-4)

) and Example 1 (see paragraph [718-30-55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1)) provide illustrations of how compensation cost is recognized for awards with service and performance conditions.

##### [718-10-30-13](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-13)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:9e9e9cec1dd19318673bbe42ee5f438fcd32e9c60ebc4270276d0c27fcda2cc2

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The fair-value-based method described in paragraphs [718-10-30-6](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-6) and

[718-10-30-10 through 30-14](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10)

uses fair value measurement techniques, and the grant-date share price and other pertinent factors are used in applying those techniques. However, the effects on the grant-date fair value of service and performance conditions that apply only during the employee's requisite service period or a nonemployee's vesting period are reflected based on the outcomes of those conditions. This Topic refers to the required measure as fair value.

##### [718-10-30-14](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-14)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:d29baed74d43a91c58ed65b4ce70359d1ad282ae931c12a126f9439efe7d3f63

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Some awards contain a [market condition](https://asc.understandingaccounting.org/glossary/m/#market-condition "A condition affecting the exercise price, exercisability, or other pertinent factors used in determining the fair value of an award under a share-based payment arrangement that relates to the achievement of either of the following: A specified price of the issuer's shares or a specified amount of intrinsic value indexed solely to the issuer's shares A specified price of the issuer's shares in terms of a similar (or index of similar) equity security (securities). The term similar as used in this definition refers to an equity security of another entity that has the same type of residual rights. For example, common stock of one entity generally would be similar to the common stock of another entity for this purpose."). The effect of a market condition is reflected in the grant-date fair value of an award. (Valuation techniques have been developed to value path-dependent options as well as other options with complex terms. Awards with market conditions, as defined in this Topic, are path-dependent options.) Compensation cost thus is recognized for an award with a market condition provided that the good is delivered or the service is rendered, regardless of when, if ever, the market condition is satisfied.

##### [718-10-30-15](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-15)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:f9bf63bfe9f5e0d0d895f2fad8776ceb6090da93f59820939ba23c6f3f5d10ba

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Market, performance, and service conditions (or any combination thereof) may affect an award's exercise price, contractual term, quantity, conversion ratio, or other factors that are considered in measuring an award's grant-date fair value. A grant-date fair value shall be estimated for each possible outcome of such a performance or service condition, and the final measure of compensation cost shall be based on the amount estimated at the grant date for the condition or outcome that is actually satisfied. Paragraphs

[718-10-55-64 through 55-66](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-64)

provide additional guidance on the effects of market, performance, and service conditions that affect factors other than vesting or exercisability. Examples 2 (see paragraph [718-20-55-35](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-35)); 3 (see paragraph [718-20-55-41](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-41)); 4 (see paragraph [718-20-55-47](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-47)); 5 (see paragraph [718-20-55-51](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-51)); and 7 (see paragraph [718-20-55-68](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-68)) provide illustrations of accounting for awards with such conditions.

##### [718-10-30-16](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-16)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:c13991e86a8b432ec3601286dadb9da424b0c4bce6ff5b9af658599adba2122f

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


[Paragraph not used](https://asc.understandingaccounting.org/updates/page-1833002/).

##### [718-10-30-17](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-17)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:a4bd41d2e54bdf3f916be17a25acc8e41b4cfe95ec35e07c935af8e39b88fab9

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A nonvested equity share or nonvested equity [share unit](https://asc.understandingaccounting.org/glossary/s/#share-unit "A contract under which the holder has the right to convert each unit into a specified number of shares of the issuing entity.") shall be measured at its fair value as if it were vested and issued on the grant date.

##### [718-10-30-18](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-18)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:76c520028e9315e279bf863737442797793a64d64389150cf3903661592f84d1

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Nonvested shares granted in share-based payment transactions usually are referred to as [restricted shares](https://asc.understandingaccounting.org/glossary/r/#restricted-share "A share for which sale is contractually or governmentally prohibited for a specified period of time. Most grants of shares to grantees are better termed nonvested shares because the limitation on sale stems solely from the forfeitability of the shares before grantees have satisfied the service, performance, or other condition(s) necessary to earn the rights to the shares. Restricted shares issued for consideration other than for goods or services, on the other hand, are fully paid for immediately. For those shares, there is no period analogous to an employee's requisite service period or a nonemployee's vesting period during which the issuer is unilaterally obligated to issue shares when the purchaser pays for those shares, but the purchaser is not obligated to buy the shares. The term restricted shares refers only to fully vested and outstanding shares whose sale is contractually or governmentally prohibited for a specified period of time. Vested equity instruments that are transferable to a grantee's immediate family members or to a trust that benefits only those family members are restricted if the transferred instruments retain the same prohibition on sale to third parties. See Nonvested Shares."), but this Topic reserves that term for fully vested and outstanding shares whose sale is contractually or governmentally prohibited for a specified period of time.

##### [718-10-30-19](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-19)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:29d0a8ecf965acc3c578fa8040fa6158092ea7f2ca7bbecbef6e636021e7d83a

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A restricted share awarded to a grantee, that is, a share that will be restricted after the grantee has a vested right to it, shall be measured at its fair value, which is the same amount for which a similarly restricted share would be issued to third parties. Example 8 (see paragraph [718-20-55-71](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-71)) provides an illustration of accounting for an award of nonvested shares to employees.

#### Nonpublic Entity—Calculated Value for Nonemployee Awards

##### [718-10-30-19A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-19A)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:8b2c8626955a0bf6c2a1ea561cf25013043b5310c2f62a3ffbb27c325b02ae35

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Similar to employee equity share options and similar instruments, a nonpublic entity may not be able to reasonably estimate the fair value of nonemployee awards because it is not practicable for the nonpublic entity to estimate the expected volatility of its share price. In that situation, the nonpublic entity shall account for nonemployee equity share options and similar instruments on the basis of a value calculated using the historical volatility of an appropriate industry sector index instead of the expected volatility of the nonpublic entity's share price (the calculated value) in accordance with paragraph [718-10-30-20](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20). A nonpublic entity's use of calculated value shall be consistent between employee share-based payment transactions and nonemployee share-based payment transactions.

#### Nonpublic Entity—Calculated Value

##### [718-10-30-20](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:2380641f3d01caa71f7b3869be53a6d60afb8f3a06ca259a659e8cfc4f9b31ce

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A nonpublic entity may not be able to reasonably estimate the fair value of its equity share options and similar instruments because it is not practicable for it to estimate the expected volatility of its share price. In that situation, the entity shall account for its equity share options and similar instruments based on a value calculated using the historical volatility of an appropriate industry sector index instead of the expected volatility of the entity's share price (the calculated value). Throughout the remainder of this Topic, provisions that apply to accounting for share options and similar instruments at fair value also apply to calculated value. Paragraphs

[718-10-55-51 through 55-58](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-51)

and Example 9 (see paragraph [718-20-55-76](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-76)) provide additional guidance on applying the calculated value method to equity share options and similar instruments granted by a nonpublic entity.

#### Nonpublic Entity—Practical Expedient for Expected Term

##### [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:1a3dc65f80b87bd702de776fdb10bc68d92f79e34471d6851907be64021fe321

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


For an award that meets the conditions in paragraph [718-10-30-20B](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20B), a nonpublic entity may make an entity-wide accounting policy election to estimate the expected term using the following practical expedient:

1.  a
    
    If vesting is only dependent upon a service condition, a nonpublic entity shall estimate the expected term as the midpoint between the employee's requisite service period or the nonemployee's vesting period and the contractual term of the award.
    
2.  b
    
    If vesting is dependent upon satisfying a performance condition, a nonpublic entity first would determine whether the performance condition is [probable](https://asc.understandingaccounting.org/glossary/p/#probable "The future event or events are likely to occur.") of being achieved.
    
    1.  1
        
        If the nonpublic entity concludes that the performance condition is probable of being achieved, the nonpublic entity shall estimate the expected term as the midpoint between the employee's requisite service period (a nonpublic entity shall consider the guidance in paragraphs
        
        [718-10-55-69 through 55-79](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-69)
        
        when determining the requisite service period of the award) or the nonemployee's vesting period and the contractual term.
        
    2.  2
        
        If the nonpublic entity concludes that the performance condition is not probable of being achieved, the nonpublic entity shall estimate the expected term as either:
        
        1.  i
            
            The contractual term if the service period is implied (that is, the requisite service period or the nonemployee's vesting period is not explicitly stated but inferred based on the achievement of the performance condition at some undetermined point in the future)
            
        2.  ii
            
            The midpoint between the employee's requisite service period or the nonemployee's vesting period and the contractual term if the requisite service period is stated explicitly.
            

Paragraph [718-10-55-50A](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-50A) provides implementation guidance on the practical expedient.

##### [718-10-30-20B](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20B)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:f40b30c3e5eff8d418e553761a9dc3f7ecec9affe679a8fa125c3a08ceedbf00

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A nonpublic entity that elects to apply the practical expedient in paragraph [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A) shall apply the practical expedient to a share option or similar award that has all of the following characteristics:

1.  a
    
    The share option or similar award is granted at the money.
    
2.  b
    
    The grantee has only a limited time to exercise the award (typically 30-90 days) if the grantee no longer provides goods, terminates service after vesting, or ceases to be a customer.
    
3.  c
    
    The grantee can only exercise the award. The grantee cannot sell or hedge the award.
    
4.  d
    
    The award does not include a market condition.
    

A nonpublic entity that elects to apply the practical expedient in paragraph [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A) may always elect to use the contractual term as the expected term when estimating the fair value of a nonemployee award as described in paragraph [718-10-30-10A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-10A). However, a nonpublic entity must apply the practical expedient in paragraph [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A) for all nonemployee awards that have all the characteristics listed in this paragraph if that nonpublic entity does not elect to use the contractual term as the expected term and that nonpublic entity elects the accounting policy election to apply the practical expedient in paragraph [718-10-30-20A](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20A).

#### Nonpublic Entity—Practical Expedient for Current Price

##### [718-10-30-20C](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20C)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:1ea568e89db5d55ffeeecd98a7bbecab948b11208f9375c3bf0bb2d02d334c6e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


As a practical expedient, a [nonpublic entity](https://asc.understandingaccounting.org/glossary/n/#nonpublic-entity "Any entity other than one that meets any of the following criteria: Has equity securities that trade in a public market either on a stock exchange (domestic or foreign) or in an over-the-counter market, including securities quoted only locally or regionally Makes a filing with a regulatory agency in preparation for the sale of any class of equity securities in a public market Is controlled by an entity covered by the preceding criteria. An entity that has only debt securities trading in a public market (or that has made a filing with a regulatory agency in preparation to trade only debt securities) is a nonpublic entity.") may use a value determined by the reasonable application of a reasonable valuation method as the current price of its underlying share for purposes of determining the fair value of an [award](https://asc.understandingaccounting.org/glossary/a/#award "The collective noun for multiple instruments with the same terms and conditions granted at the same time either to a single grantee or to a group of grantees. An award may specify multiple vesting dates, referred to as graded vesting, and different parts of an award may have different expected terms. References to an award also apply to a portion of an award.") that is classified as equity in accordance with paragraphs

[718-10-25-6 through 25-18](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-6)

at [grant date](https://asc.understandingaccounting.org/glossary/g/#grant-date "The date at which a grantor and a grantee reach a mutual understanding of the key terms and conditions of a share-based payment award. The grantor becomes contingently obligated on the grant date to issue equity instruments or transfer assets to a grantee who delivers goods or renders services or purchases goods or services as a customer. Awards made under an arrangement that is subject to shareholder approval are not deemed to be granted until that approval is obtained unless approval is essentially a formality (or perfunctory), for example, if management and the members of the board of directors control enough votes to approve the arrangement. Similarly, individual awards that are subject to approval by the board of directors, management, or both are not deemed to be granted until all such approvals are obtained. The grant date for an award of equity instruments is the date that a grantee begins to benefit from, or be adversely affected by, subsequent changes in the price of the grantor's equity shares. Paragraph 718-10-25-5 provides guidance on determining the grant date. See Service Inception Date.") or upon a [modification](https://asc.understandingaccounting.org/glossary/m/#modification "A change in the terms or conditions of a share-based payment award."). This practical expedient may not be used for awards classified as liabilities in accordance with paragraphs

[718-10-25-6 through 25-18](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-6)

.

##### [718-10-30-20D](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20D)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:8ec694896c899119841c55b46605053c47027e9da19afc15587f3bd98e7725c5

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The determination of whether a valuation method is reasonable, or whether an application of a valuation method is reasonable, shall be made based on the facts and circumstances as of the [measurement date](https://asc.understandingaccounting.org/glossary/m/#measurement-date "The date at which the equity share price and other pertinent factors, such as expected volatility, that enter into measurement of the total recognized amount of compensation cost for an award of share-based payment are fixed."). Factors to be considered under a reasonable valuation method include, as applicable:

1.  a
    
    The value of tangible and intangible assets of the nonpublic entity
    
2.  b
    
    The present value of anticipated future cash flows of the nonpublic entity
    
3.  c
    
    The market value of stock or equity interests in similar corporations and other entities engaged in trades or businesses substantially similar to those engaged in by the nonpublic entity for which the stock is to be valued, the value of which can be readily determined through nondiscretionary, objective means (such as through trading prices on an established securities market or an amount paid in an arm's-length private transaction)
    
4.  d
    
    Recent arm's-length transactions involving the sale or transfer of stock or equity interests of the nonpublic entity
    
5.  e
    
    Other relevant factors such as control premiums or discounts for lack of marketability and whether the valuation method is used for other purposes that have a material economic effect on the nonpublic entity, its stockholders, or its creditors
    
6.  f
    
    The nonpublic entity's consistent use of a valuation method to determine the value of its stock or assets for other purposes, including for purposes unrelated to compensation of service providers.

##### [718-10-30-20E](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20E)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:0c92783919e05f3d2d6fdb490a022f1e77cc25c26c0c2c471c05bbe05b7bf08e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The use of a valuation method is not reasonable if that valuation method does not take into consideration when applying its methodology all available information material to the value of the nonpublic entity.

##### [718-10-30-20F](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20F)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:977b1c246be52d3e1582ff0856dca021a2ceaff4ecd9032dec321fda5ec58ddc

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The use of a value previously calculated under a valuation method is not reasonable as of a later date if either of the following conditions is met:

1.  a
    
    The calculation fails to reflect information available after the date of the calculation that may materially affect the value of the nonpublic entity (for example, the resolution of material litigation or the issuance of a patent).
    
2.  b
    
    The value was calculated with respect to a date that is more than 12 months earlier than the date for which the valuation is being used.

##### [718-10-30-20G](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20G)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:5ccbff80602ab37af5b1eae1a69748ad0cd727f05edd2233ceacc0bf047d280e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A valuation performed in accordance with Treasury Regulation Section 1.409A-1(b)(5)(iv)(B) having the characteristics described in paragraphs

[718-10-30-20D through 30-20F](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20D)

is an example of a valuation that is reasonable under the practical expedient in those paragraphs.

##### [718-10-30-20H](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20H)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:aba5c9613ae414358981e69d1b25039d0691945083dc62092abda5b58407987a

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A nonpublic entity that elects the practical expedient in paragraphs

[718-10-30-20C through 30-20F](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20C)

shall do so on a measurement-date-by-measurement-date basis. That is, the practical expedient shall be applied to all share-based awards within the scope of the practical expedient having the same underlying share and the same measurement date.

#### Difficulty of Estimation

##### [718-10-30-21](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-21)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:c1cd85a1020ac6d36d8c3be4f554be20e528ce41f1960738ab90c95fed9eef0d

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


It should be possible to reasonably estimate the fair value of most equity share options and other equity instruments at the date they are granted. Section 718-10-55 illustrates techniques for estimating the fair values of several instruments with complicated features. However, in rare circumstances, it may not be possible to reasonably estimate the fair value of an equity share option or other equity instrument at the grant date because of the complexity of its terms.

##### [718-10-30-22](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-22)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:fd7238078e0ad18d747eba522701df7fbec4484fcad07502233d7e4f3214e873

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An equity instrument for which it is not possible to reasonably estimate fair value at the grant date shall be accounted for based on its intrinsic value (see paragraph [718-20-35-1](https://asc.understandingaccounting.org/asc/718/20/#718-20-35-1) for measurement after issue date).

#### Reload and Contingent Features

##### [718-10-30-23](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-23)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:e220449e852b99feeeab67595c9b8b358262f5243dab3dd9192041ab8bf39c34

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The fair value of each award of equity instruments, including an award of options with a reload feature (reload options), shall be measured separately based on its terms and the share price and other pertinent factors at the grant date. The effect of a reload feature in the terms of an award shall not be included in estimating the grant-date fair value of the award. Rather, a subsequent grant of reload options pursuant to that provision shall be accounted for as a separate award when the reload options are granted.

##### [718-10-30-24](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-24)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:80306eb34778563f2728ff378193da714495c3ca67bc95d12a36c097bb42e5f1

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


A contingent feature of an award that might cause a grantee to return to the entity either equity instruments earned or realized gains from the sale of equity instruments earned for consideration that is less than fair value on the date of transfer (including no consideration), such as a clawback feature (see paragraph [718-10-55-8](https://asc.understandingaccounting.org/asc/718/10/#718-10-55-8)), shall not be reflected in estimating the grant-date fair value of an equity instrument.

#### Requisite Service Period

##### [718-10-30-25](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-25)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:9f898b5930d1705d2f4fc00970cd8faf67d6a6518832f2180712d1e9149d8cc8

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


An entity shall make its initial best estimate of the requisite service period at the grant date (or at the [service inception date](https://asc.understandingaccounting.org/glossary/s/#service-inception-date "The date at which the employee's requisite service period or the nonemployee's vesting period begins. The service inception date usually is the grant date, but the service inception date may differ from the grant date (see Example 6 [see paragraph 718-10-55-107] for an illustration of the application of this term to an employee award)."), if that date precedes the grant date) and shall base accruals of compensation cost on that period.

##### [718-10-30-26](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-26)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:ec78da0e865a5a38e77b57b8a368911ad297a8935febad5c8d8b31eeb3ad7ed7

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


The initial best estimate and any subsequent adjustment to that estimate of the requisite service period for an award with a combination of market, performance, or service conditions shall be based on an analysis of all of the following:

1.  a
    
    All vesting and exercisability conditions
    
2.  b
    
    All explicit, implicit, and derived service periods
    
3.  c
    
    The probability that performance or service conditions will be satisfied.

#### Market, Performance, and Service Conditions

##### [718-10-30-27](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-27)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:52b12386aefdfdda5908978c9e77de572aac68e0874bc5c572decc8d52c8f34e

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


Performance or service conditions that affect vesting are not reflected in estimating the fair value of an award at the grant date because those conditions are restrictions that stem from the forfeitability of instruments to which grantees have not yet earned the right. However, the effect of a market condition is reflected in estimating the fair value of an award at the grant date (see paragraph [718-10-30-14](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-14)). For purposes of this Topic, a market condition is not considered to be a vesting condition, and an award is not deemed to be forfeited solely because a market condition is not satisfied.

##### [718-10-30-28](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-28)

Pending content: no

Source downloaded (UTC): 2026-09-10T01:03:34.633Z to 2026-09-10T01:03:34.633Z

Record version: sha256:59e65d0d7309b2e3154b0b4221c9f43960e1bde568e0a5e04bcd2535e50ec158

Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f

Effective as of: not established by retrieval timestamps.


In some cases, the terms of an award may provide that a performance target that affects vesting could be achieved after an employee completes the requisite service period or a nonemployee satisfies a vesting period. That is, the grantee would be eligible to vest in the award regardless of whether the grantee is rendering service or delivering goods on the date the performance target is achieved. A performance target that affects vesting and that could be achieved after an employee's requisite service period or a nonemployee's vesting period shall be accounted for as a performance condition. As such, the performance target shall not be reflected in estimating the fair value of the award at the grant date. Compensation cost shall be recognized in the period in which it becomes probable that the performance target will be achieved and should represent the compensation cost attributable to the period(s) for which the service or goods already have been provided. If the performance target becomes probable of being achieved before the end of the employee's requisite service period or the nonemployee's vesting period, the remaining unrecognized compensation cost for which service or goods have not yet been provided shall be recognized prospectively over the remaining employee's requisite service period or the nonemployee's vesting period. The total amount of compensation cost recognized during and after the employee's requisite service period or the nonemployee's vesting period shall reflect the number of awards that are expected to [vest](https://asc.understandingaccounting.org/glossary/v/#vest "To earn the rights to. A share-based payment award becomes vested at the date that the grantee's right to receive or retain shares, other instruments, or cash under the award is no longer contingent on satisfaction of either a service condition or a performance condition. Market conditions are not vesting conditions. The stated vesting provisions of an award often establish the employee's requisite service period or the nonemployee's vesting period, and an award that has reached the end of the applicable period is vested. However, as indicated in the definition of requisite service period and equally applicable to a nonemployee's vesting period, the stated vesting period may differ from those periods in certain circumstances. Thus, the more precise terms would be options, shares, or awards for which the requisite good has been delivered or service has been rendered and the end of the employee's requisite service period or the nonemployee's vesting period.") based on the performance target and shall be adjusted to reflect those awards that ultimately vest. An entity that has an accounting policy to account for forfeitures when they occur in accordance with paragraph [718-10-35-1D](https://asc.understandingaccounting.org/asc/718/10/#718-10-35-1D) or [718-10-35-3](https://asc.understandingaccounting.org/asc/718/10/#718-10-35-3) shall reverse compensation cost previously recognized, in the period the award is forfeited, for an award that is forfeited before completion of the employee's requisite service period or the nonemployee's vesting period. The employee's requisite service period and the nonemployee's vesting period end when the grantee can cease rendering service or delivering goods and still be eligible to vest in the award if the performance target is achieved. As indicated in the definition of vest, the stated vesting period (which includes the period in which the performance target could be achieved) may differ from the employee's requisite service period or the nonemployee's vesting period.