{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/718/30/#35-subsequent-measurement","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"718","topic_title":"Compensation—Stock Compensation","subtopic":"718-30","subtopic_title":"Awards Classified as Liabilities","section":{"number":"35","label":"35 Subsequent Measurement","anchor":"35-subsequent-measurement","is_sec":false,"groups":[{"block":null,"heading":"Measurement","paragraphs":[{"citation":"718-30-35-1","para":"35-1","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CD589BF5-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">The <a href=\"/glossary/f/#fair-value\" class=\"term\" title=\"The price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.\"><span>fair value</span></a> of liabilities incurred in <a href=\"/glossary/s/#share-based-payment-transactions\" class=\"term\" title=\"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.\"><span>share-based payment transactions</span></a> shall be remeasured at the end of each reporting period through <a href=\"/glossary/s/#settlement-of-an-award\" class=\"term\" title=\"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.\"><span>settlement</span></a>. </span></span></div></div>","snippet":"The fair value of liabilities incurred in share-based payment transactions shall be remeasured at the end of each reporting period through settlement.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:c68f9997ff86768e4a35319ad0233a6f7e257031f0350d0e1664ab017238149d","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}},{"citation":"718-30-35-2","para":"35-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CD589ED4-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Changes in the fair value (or <a href=\"/glossary/i/#intrinsic-value\" class=\"term\" title=\"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.)\"><span>intrinsic value</span></a> for a <a href=\"/glossary/n/#nonpublic-entity\" class=\"term\" title=\"Any entity that does not meet any of the following conditions: Its debt or equity securities 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. It is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets). It files with a regulatory agency in preparation for the sale of any class of debt or equity securities in a public market. It is required to file or furnish financial statements with the Securities and Exchange Commission. It is controlled by an entity covered by criteria (a) through (d).\"><span>nonpublic entity</span></a> that elects that method) of a liability incurred under a share-based payment arrangement </span></span><span class=\"sfragment\" id=\"sfr_CD58A0AC-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">issued in exchange for goods or services </span></span><span class=\"sfragment\" id=\"sfr_CD58A27A-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">that occur during the <a href=\"/glossary/e/#employee\" class=\"term\" title=\"An individual over whom the grantor of a share-based compensation award exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. Internal Revenue Service (IRS) Revenue Ruling 87-41. A reporting entity based in a foreign jurisdiction would determine whether an employee-employer relationship exists based on the pertinent laws of that jurisdiction. Accordingly, a grantee meets the definition of an employee if the grantor consistently represents that individual to be an employee under common law. The definition of an employee for payroll tax purposes under the U.S. Internal Revenue Code includes common law employees. Accordingly, a grantor that classifies a grantee potentially subject to U.S. payroll taxes as an employee also must represent that individual as an employee for payroll tax purposes (unless the grantee is a leased employee as described below). A grantee does not meet the definition of an employee solely because the grantor represents that individual as an employee for some, but not all, purposes. For example, a requirement or decision to classify a grantee as an employee for U.S. payroll tax purposes does not, by itself, indicate that the grantee is an employee because the grantee also must be an employee of the grantor under common law. A leased individual is deemed to be an employee of the lessee if all of the following requirements are met: The leased individual qualifies as a common law employee of the lessee, and the lessor is contractually required to remit payroll taxes on the compensation paid to the leased individual for the services provided to the lessee. The lessor and lessee agree in writing to all of the following conditions related to the leased individual: The lessee has the exclusive right to grant stock compensation to the individual for the employee service to the lessee. The lessee has a right to hire, fire, and control the activities of the individual. (The lessor also may have that right.) The lessee has the exclusive right to determine the economic value of the services performed by the individual (including wages and the number of units and value of stock compensation granted). The individual has the ability to participate in the lessee's employee benefit plans, if any, on the same basis as other comparable employees of the lessee. The lessee agrees to and remits to the lessor funds sufficient to cover the complete compensation, including all payroll taxes, of the individual on or before a contractually agreed upon date or dates. A nonemployee director does not satisfy this definition of employee. Nevertheless, nonemployee directors acting in their role as members of a board of directors are treated as employees if those directors were elected by the employer's shareholders or appointed to a board position that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards granted to nonemployee directors for their services as directors. Awards granted to those individuals for other services shall be accounted for as awards to nonemployees. (P) December 16, 2026; (N) December 16, 2026220-40-65-1An individual over whom a reporting entity exercises or has the right to exercise sufficient control to establish an employer-employee relationship based on common law as illustrated in case law and currently under U.S. Internal Revenue Service (IRS) Revenue Ruling 87-41. A reporting entity based in a foreign jurisdiction would determine whether an employee-employer relationship exists based on the pertinent laws of that jurisdiction. Accordingly, an individual meets the definition of an employee if the reporting entity consistently represents that individual to be an employee under common law. The definition of an employee for payroll tax purposes under the U.S. Internal Revenue Code includes common law employees. Accordingly, a reporting entity that classifies an individual potentially subject to U.S. payroll taxes as an employee also must represent that individual as an employee for payroll tax purposes (unless the individual is a leased employee as described below). An individual that meets the definition of an employee includes, but is not limited to, a full-time, part-time, temporary, or seasonal employee. An individual does not meet the definition of an employee solely because the reporting entity represents that individual as an employee for some, but not all, purposes. For example, a requirement or decision to classify an individual as an employee for U.S. payroll tax purposes does not, by itself, indicate that the individual is an employee because the individual also must be an employee of the reporting entity under common law. A leased individual is deemed to be an employee of the lessee if all of the following requirements are met: The leased individual qualifies as a common law employee of the lessee, and the lessor is contractually required to remit payroll taxes on the compensation paid to the leased individual for the services provided to the lessee. The lessor and lessee agree in writing to all of the following conditions related to the leased individual: The lessee has the exclusive right to grant compensation to the individual for the employee service to the lessee. The lessee has a right to hire, fire, and control the activities of the individual. (The lessor also may have that right.) The lessee has the exclusive right to determine the economic value of the services performed by the individual (including wages and the number of units and value of stock compensation granted). The individual has the ability to participate in the lessee's employee benefit plans, if any, on the same basis as other comparable employees of the lessee. The lessee agrees to and remits to the lessor funds sufficient to cover the complete compensation, including all payroll taxes, of the individual on or before a contractually agreed upon date or dates. A nonemployee director does not satisfy this definition of employee. Nevertheless, nonemployee directors acting in their role as members of a board of directors are treated as employees if those directors were elected by the employer's shareholders or appointed to a board position that will be filled by shareholder election when the existing term expires. However, that requirement applies only to awards and other compensation granted to nonemployee directors for their services as directors. Awards granted and compensation paid to those individuals for other services shall be accounted for as awards and compensation to nonemployees.\"><span>employee's</span></a> requisite service period </span></span><span class=\"sfragment\" id=\"sfr_CD58A40C-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">or the nonemployee's vesting period </span></span><span class=\"sfragment\" id=\"sfr_CD58A5C2-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\"> shall be recognized as compensation cost over that period. The percentage of the fair value (or intrinsic value) that is accrued as compensation cost at the end of each period shall equal the percentage of the requisite service that has been rendered </span></span><span class=\"sfragment\" id=\"sfr_CD58A7C7-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">for an employee award or the percentage that would have been recognized had the grantor paid cash for the goods or services instead of paying with a nonemployee award </span></span><span class=\"sfragment\" id=\"sfr_CD58A9D7-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">at that date. Changes in the fair value (or intrinsic value) of a liability </span></span><span class=\"sfragment\" id=\"sfr_CD58ABA0-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">issued in exchange for goods or services </span></span><span class=\"sfragment\" id=\"sfr_CD58AD41-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">that occur after the end of the employee's requisite service period or the nonemployee's vesting period are compensation cost of the period in which the changes occur. Any difference between the amount for which a liability <a href=\"/glossary/a/#award\" class=\"term\" title=\"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.\"><span>award</span></a> </span></span><span class=\"sfragment\" id=\"sfr_CD58AEDA-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">issued in exchange for goods or services </span></span><span class=\"sfragment\" id=\"sfr_CD58B0C2-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">is settled and its fair value at the settlement date as estimated in accordance with the provisions of this Subtopic is an adjustment of compensation cost in the period of settlement. Example 1 (see paragraph <a href=\"/asc/718/30/#718-30-55-1\" class=\"xref\">718-30-55-1</a>) provides an illustration of accounting for a liability award </span></span><span class=\"sfragment\" id=\"sfr_CD58B24D-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">issued in exchange for service </span></span><span class=\"sfragment\" id=\"sfr_CD58B3DF-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">from the <a href=\"/glossary/g/#grant-date\" class=\"term\" title=\"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.\"><span>grant date</span></a> through its settlement. </span></span></div></div>","snippet":"Changes in the fair value (or intrinsic value for a nonpublic entity that elects that method) of a liability incurred under a share-based payment arrangement issued in exchange for goods or services that occur during the…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e0b549e50e7e6533ccae72f4d3b27b1f0dd0c024e281bf5a5eb65878f4c97d31","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}},{"citation":"718-30-35-3","para":"35-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CD58B594-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">A <a href=\"/glossary/p/#public-entity\" class=\"term\" title=\"An entity 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. That is, a subsidiary of a public entity is itself a public entity. 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 not a public entity.\"><span>public entity</span></a> shall measure a liability award under a <a href=\"/glossary/s/#share-based-payment-arrangements\" class=\"term\" title=\"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.\"><span>share-based payment arrangement</span></a> based on the award's fair value remeasured at each reporting date until the date of settlement. Compensation cost for each period until settlement shall be based on the change (or a portion of the change, depending on the percentage of the requisite service that has been rendered </span></span><span class=\"sfragment\" id=\"sfr_CD58B7B3-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">for an employee award or the percentage that would have been recognized had the grantor paid cash for the goods or services instead of paying with a nonemployee award </span></span><span class=\"sfragment\" id=\"sfr_CD58B96C-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">at the reporting date) in the fair value of the instrument for each reporting period. Example 1 (see paragraph <a href=\"/asc/718/30/#718-30-55-1\" class=\"xref\">718-30-55-1</a>) provides an illustration of accounting for an instrument classified as a liability using the fair-value-based method. </span></span></div></div>","snippet":"A public entity shall measure a liability award under a share-based payment arrangement based on the award's fair value remeasured at each reporting date until the date of settlement. Compensation cost for each period un…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5e6d662c0b2be134695ffc2e35d486f3ee9e1ec227799d2b027fa59cda23dcb4","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}},{"citation":"718-30-35-4","para":"35-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CD58BB41-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Regardless of the measurement method initially selected under paragraph <a href=\"/asc/718/10/#718-10-30-20\" class=\"xref\">718-10-30-20</a>, a nonpublic entity shall remeasure its liabilities under share-based payment arrangements at each reporting date until the date of settlement. The fair-value-based method is preferable for purposes of justifying a change in accounting principle under Topic <a altsource=\"GUID-2C19D78B-1169-4772-A984-E4C872339081.ditamap\" class=\"ditamap\">250</a>. Example 1 (see paragraph <a href=\"/asc/718/30/#718-30-55-1\" class=\"xref\">718-30-55-1</a>) provides an illustration of accounting for an instrument classified as a liability using the fair-value-based method. Example 2 (see paragraph <a href=\"/asc/718/30/#718-30-55-12\" class=\"xref\">718-30-55-12</a>) provides an illustration of accounting for an instrument classified as a liability using the intrinsic value method. </span></span><span class=\"sfragment\" id=\"sfr_CD58BCDE-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">A nonpublic entity shall subsequently measure awards determined to be consideration payable to a customer (as described in paragraph <a href=\"/asc/606/10/#606-10-32-25\" class=\"xref\">606-10-32-25</a>) at fair value.</span></span></div></div>","snippet":"Regardless of the measurement method initially selected under paragraph 718-10-30-20, a nonpublic entity shall remeasure its liabilities under share-based payment arrangements at each reporting date until the date of set…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:4eec11829f19cc3c586910515e6425d0e7ded8dbc6040e83c9525050bbba8546","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f2ac4d56c02543a9154763d6aeb6ec43fd1af8356392515614d913ede0b5494e","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}},{"block":null,"heading":"Modification of an Award","paragraphs":[{"citation":"718-30-35-5","para":"35-5","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CD58BEA8-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">A <a href=\"/glossary/m/#modification\" class=\"term\" title=\"A change in the terms or conditions of a share-based payment award.\"><span>modification</span></a> of a liability award is accounted for as the exchange of the original award for a new award. However, because liability awards are remeasured at their fair value (or intrinsic value for a nonpublic entity that elects that method) at each reporting date, no special guidance is necessary in accounting for a modification of a liability award that remains a liability after the modification (see Example 15, Case C [paragraph<a href=\"/asc/718/20/#718-20-55-135\" class=\"xref\">718-20-55-135</a>] for what happens when the modification causes the award to no longer be a liability). </span></span></div></div>","snippet":"A modification of a liability award is accounted for as the exchange of the original award for a new award. However, because liability awards are remeasured at their fair value (or intrinsic value for a nonpublic entity …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:de1229747079a51859b4d49d9d8799d87be25860826552ca25a64a2fcc03d552","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a29fe1c410a22758c2422765c48b448a6fc5f64cf8db277f4920b09c48b6e07","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62e5814bafa0409b9a4100a91a81acc5181878d57d71ed6d6e33152b1ed833a1","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62e5814bafa0409b9a4100a91a81acc5181878d57d71ed6d6e33152b1ed833a1","downloaded_from":"2026-09-10T01:05:06.365Z","last_downloaded_at":"2026-09-10T01:05:06.365Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480843","source_sha256":"a746c56c735824a873e951e40802609cb9f11cdfaaec95d577a28fc973f7e892"}}