# ASC 718-30: Compensation—Stock Compensation — Awards Classified as Liabilities Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/718/30/) 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): 2026-09-10T01:04:51.752Z to 2026-09-10T01:05:17.157Z Record version: sha256:d8d386cfcfca9375a7185b28d3dd32b58f576b24ecd8dc3c4a2d369eee89749d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30: Compensation—Stock Compensation — Awards Classified as Liabilities ### Machine-generated study aids ```json { "summary": "ASC 718-30 governs share-based payment awards that are classified as liabilities rather than equity (e.g., cash-settled stock appreciation rights). Liability awards use the same grant-date measurement objective as equity awards, but the measurement date is the settlement date, so the liability is remeasured at fair value (or intrinsic value if a nonpublic entity so elects) at every reporting date through settlement. Changes in value during the requisite service (or nonemployee vesting) period are recognized as compensation cost in proportion to service rendered; changes after that period are expensed immediately in the period of change.", "key_points": [ "The Subtopic applies to awards classified as liabilities by the grantor under paragraphs 718-10-25-6 through 25-19A, and does not apply to equity instruments held by an ESOP (718-30-15-2 through 15-3).", "The grant-date measurement objective for liabilities is the same as for equity instruments (718-10-30-6), but the measurement date for liability instruments is the date of settlement (718-30-30-1).", "A nonpublic entity makes a policy election to measure all liability-classified awards (employee and nonemployee) at fair value or at intrinsic value, except that awards that are consideration payable to a customer under 606-10-32-25 must be measured at fair value initially and subsequently (718-30-30-2; 718-30-35-4).", "Liabilities incurred in share-based payment transactions are remeasured at the end of each reporting period through settlement (718-30-35-1; 718-30-35-3; 718-30-35-4).", "During the requisite service period (employee) or vesting period (nonemployee), the accrued liability equals the percentage of fair (or intrinsic) value corresponding to the percentage of service rendered; value changes after that period are compensation cost of the period in which they occur (718-30-35-2).", "Any difference between the settlement amount and the award's fair value at settlement date is an adjustment of compensation cost in the period of settlement (718-30-35-2).", "A modification of a liability award is treated as an exchange of the original award for a new award, but no special guidance is needed if the award remains a liability because it is already remeasured each period (718-30-35-5); the fair-value-based method is preferable for a Topic 250 change in accounting principle (718-30-35-4)." ], "categories": [ "Stock compensation", "Compensation and benefits", "Subsequent measurement", "Fair value" ], "audience_level": "intermediate", "student_note": "The exam trap is forgetting that liability awards are NOT frozen at grant-date fair value the way equity awards are — they are marked to fair value (or intrinsic value for electing nonpublic entities) every period until cash settlement, so compensation cost swings up and down with the stock price. Also remember the two-step math: liability = current value × % of requisite service rendered, and expense = change in that liability balance.", "related_topics": [ "718-10", "718-20", "718-740", "606-10", "250", "480" ], "key_concepts": [ "liability-classified award", "cash-settled stock appreciation rights", "remeasurement through settlement", "requisite service period", "intrinsic value election", "nonpublic entity policy election", "settlement date measurement", "modification of liability award" ] } ``` Source downloaded (UTC): 2026-09-10T01:04:51.752Z to 2026-09-10T01:04:51.752Z Record version: sha256:e18ecb08dbe174fa6af772a5d2f1bab4531b85307f7c44538631884bc2cf0c2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/718/30/#00-status) SEC content: no ##### [718-30-00-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:04:51.752Z to 2026-09-10T01:04:51.752Z Record version: sha256:0b5e6c268919f5e806c7fb63f45a41ddacf9ccf3bc1cb084b04c65e3990012a5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
AwardAmendedAccounting Standards Update No. 2018-0706/20/2018
Employee (2nd def.)AmendedAccounting Standards Update No. 2024-0311/04/2024
Grant DateAmendedAccounting Standards Update No. 2019-0811/11/2019
Grant DateAmendedAccounting Standards Update No. 2018-0706/20/2018
ModificationAmendedAccounting Standards Update No. 2017-0905/10/2017
Service Inception DateAmendedAccounting Standards Update No. 2018-0706/20/2018
Share OptionAmendedAccounting Standards Update No. 2018-0706/20/2018
VestAmendedAccounting Standards Update No. 2018-0706/20/2018
VolatilitySupersededAccounting Standards Update No. 2018-0706/20/2018
718-30-05-1AmendedAccounting Standards Update No. 2018-0706/20/2018
718-30-15-2AmendedAccounting Standards Update No. 2018-0706/20/2018
718-30-30-1 through 30-2AAmendedAccounting Standards Update No. 2018-0706/20/2018
718-30-30-2AmendedAccounting Standards Update No. 2019-0811/11/2019
718-30-30-2AAddedAccounting Standards Update No. 2016-0903/30/2016
718-30-35-1 through 35-3
AmendedAccounting Standards Update No. 2018-0706/20/2018
718-30-35-2AmendedAccounting Standards Update No. 2019-0811/11/2019
718-30-35-4AmendedAccounting Standards Update No. 2019-0811/11/2019
718-30-55-1AAddedAccounting Standards Update No. 2018-0706/20/2018
718-30-55-1BAddedAccounting Standards Update No. 2018-0706/20/2018
718-30-55-2AmendedAccounting Standards Update No. 2016-0903/30/2016
718-30-55-9AmendedAccounting Standards Update No. 2016-0903/30/2016
718-30-55-12AAddedAccounting Standards Update No. 2018-0706/20/2018
718-30-55-12BAddedAccounting Standards Update No. 2018-0706/20/2018
Source downloaded (UTC): 2026-09-10T01:04:53.607Z to 2026-09-10T01:04:53.607Z Record version: sha256:f73798016a468162777b4a102a489679ea4d113a166bd41a9404fb269c7f0be3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/718/30/#05-overview-and-background) SEC content: no ##### [718-30-05-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-05-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:04:53.607Z to 2026-09-10T01:04:53.607Z Record version: sha256:5ee4dd391b77b85993c01e5a7a980ac6c965e246669b452e2bd01d9c6ba665e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Share-based payment [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.") may be classified as either equity or liabilities. This Subtopic addresses instruments classified as liabilities. It is closely intertwined with Subtopic 718-10, which contains guidance applicable to instruments classified as either equity or liabilities issued in [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."). It may also be necessary in some cases to refer to the guidance contained in Subtopic 718-20. Source downloaded (UTC): 2026-09-10T01:04:56.430Z to 2026-09-10T01:04:56.430Z Record version: sha256:8866095319d99dde5d8da149b5201cd65172869eae6e2a0d0015271c67875154 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/718/30/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [718-30-15-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-15-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:04:56.430Z to 2026-09-10T01:04:56.430Z Record version: sha256:1818a2b0379410e135004d56927219ef6db0cfb1e8553a977aa6a0c8a1cb86a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section 718-10-15, with specific transaction qualifications noted below. #### Transactions ##### [718-30-15-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-15-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:04:56.430Z to 2026-09-10T01:04:56.430Z Record version: sha256:8d67808cc8783bde60eed90ea3ff34bf10380f11717220646704f1b52739d3e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic applies to share-based payment [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.") that are classified as liabilities by the grantor (see paragraphs [718-10-25-6 through 25-19A](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-6) for a description of what is classified as liability). ##### [718-30-15-3](https://asc.understandingaccounting.org/asc/718/30/#718-30-15-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:04:56.430Z to 2026-09-10T01:04:56.430Z Record version: sha256:57133d37981485a8faa76d6939e0f076beef8e593134cc7ba785d340e614e3a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The guidance in this Subtopic does not apply to equity instruments held by an employee stock ownership plan. Source downloaded (UTC): 2026-09-10T01:05:03.899Z to 2026-09-10T01:05:03.899Z Record version: sha256:8648ba5ca6e1d89e07d5d6dc09043c9b5f8d9f481c7c653fbae4789a9ee1926d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/718/30/#30-initial-measurement) SEC content: no #### Measurement Objective and Measurement Date ##### [718-30-30-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:03.899Z to 2026-09-10T01:05:03.899Z Record version: sha256:20b8b6bb914800a1e0f4f73885523f5ad904b86ac35fa210c2b2bc4286e78cbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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."), the measurement objective for liabilities incurred under [share-based compensation 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.") is the same as the measurement objective for equity instruments awarded to grantees as described in paragraph [718-10-30-6](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-6). However, 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.") for liability instruments is the date of [settlement](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."). ##### [718-30-30-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:03.899Z to 2026-09-10T01:05:03.899Z Record version: sha256:4f6bae2b784836e89bd2db660deec00d4ba59646c5230c78a68494b7774fe656 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") shall make a policy decision of whether to measure all of its liabilities incurred under share-based payment arrangements (for employee and nonemployee awards) issued in exchange for distinct goods or services at [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 at [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.)"). However, a nonpublic entity shall initially and subsequently measure awards determined to be consideration payable to a customer (as described in paragraph [606-10-32-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25)) at fair value. ##### [718-30-30-2A](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-2A) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:03.899Z to 2026-09-10T01:05:03.899Z Record version: sha256:b7e07c86072287793ad708233c8f2ecae3c804b46a026adc8f18b162873af71b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2016-09](https://asc.understandingaccounting.org/updates/asu-2016-09/). Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:62e5814bafa0409b9a4100a91a81acc5181878d57d71ed6d6e33152b1ed833a1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/718/30/#35-subsequent-measurement) SEC content: no #### Measurement ##### [718-30-35-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:c68f9997ff86768e4a35319ad0233a6f7e257031f0350d0e1664ab017238149d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [fair value](https://asc.understandingaccounting.org/glossary/f/#fair-value "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.") of liabilities incurred in [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.") shall be remeasured at the end of each reporting period through [settlement](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."). ##### [718-30-35-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:e0b549e50e7e6533ccae72f4d3b27b1f0dd0c024e281bf5a5eb65878f4c97d31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Changes in the fair value (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.)") for a [nonpublic entity](https://asc.understandingaccounting.org/glossary/n/#nonpublic-entity "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).") 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 [employee's](https://asc.understandingaccounting.org/glossary/e/#employee "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.") requisite service period or the nonemployee's vesting period 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 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 at that date. Changes in the fair value (or intrinsic value) of a liability issued in exchange for goods or services 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 [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.") issued in exchange for goods or services 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 [718-30-55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1)) provides an illustration of accounting for a liability award issued in exchange for service from 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.") through its settlement. ##### [718-30-35-3](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:5e6d662c0b2be134695ffc2e35d486f3ee9e1ec227799d2b027fa59cda23dcb4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [public entity](https://asc.understandingaccounting.org/glossary/p/#public-entity "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.") shall measure a liability award under a [share-based payment arrangement](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.") 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 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 at the reporting date) in the fair value of the instrument for each reporting period. Example 1 (see paragraph [718-30-55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1)) provides an illustration of accounting for an instrument classified as a liability using the fair-value-based method. ##### [718-30-35-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:4eec11829f19cc3c586910515e6425d0e7ded8dbc6040e83c9525050bbba8546 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Regardless of the measurement method initially selected under paragraph [718-10-30-20](https://asc.understandingaccounting.org/asc/718/10/#718-10-30-20), 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 250. Example 1 (see paragraph [718-30-55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1)) provides an illustration of accounting for an instrument classified as a liability using the fair-value-based method. Example 2 (see paragraph [718-30-55-12](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-12)) provides an illustration of accounting for an instrument classified as a liability using the intrinsic value method. A nonpublic entity shall subsequently measure awards determined to be consideration payable to a customer (as described in paragraph [606-10-32-25](https://asc.understandingaccounting.org/asc/606/10/#606-10-32-25)) at fair value. #### Modification of an Award ##### [718-30-35-5](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:06.365Z to 2026-09-10T01:05:06.365Z Record version: sha256:de1229747079a51859b4d49d9d8799d87be25860826552ca25a64a2fcc03d552 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A [modification](https://asc.understandingaccounting.org/glossary/m/#modification "A change in the terms or conditions of a share-based payment award.") 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 \[paragraph[718-20-55-135](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-135)\] for what happens when the modification causes the award to no longer be a liability). Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:af8d4a931ab3f5db8f26e8add6c377d81d4530e73f323362001c676ae251be9d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/718/30/#55-implementation-guidance-and-illustrations) SEC content: no #### Illustrations ##### [718-30-55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:b4d4c5b88c48f82f790796df1af629f0fa6a40f1d7d000c8ddb17f561d767fb8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [718-30-35-2 through 35-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-2) and [718-740-25-2 through 25-4](https://asc.understandingaccounting.org/asc/718/740/#718-740-25-2) . ##### [718-30-55-1A](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1A) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:5423ef665c775b648cb98350ca7d331747d39a2a68e54b704181dcc9f969bd22 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example (see paragraphs [718-30-55-2 through 55-11](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-2) ) describes [employee](https://asc.understandingaccounting.org/glossary/e/#employee "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.") awards. However, the principles on how to account for the various aspects of employee awards, except for the compensation cost attribution and certain inputs to valuation, are the same for nonemployee awards. Consequently, the concepts about valuation and forfeiture estimation and remeasurement of awards, exercise, and expiration in paragraphs [718-30-55-2 through 55-11](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-2) are equally applicable to nonemployee awards with the same features as the awards in this Example (that is, awards with a specified period of time for vesting classified as liabilities). Therefore, the guidance in those paragraphs may serve as implementation guidance for similar nonemployee awards. ##### [718-30-55-1B](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-1B) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:5cdb328f88a48cf736f51b93f490cd63437ecae02e50e299b0030646199ff847 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Compensation cost attribution for awards to nonemployees may be the same or different for employee awards. That is because an entity is required to recognize compensation cost for nonemployee awards in the same manner as if the entity had paid cash in accordance with paragraph [718-10-25-2C](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-2C). Additionally, valuation amounts used in this Example could be different because an entity may elect to use the contractual term as the expected term of share options and similar instruments when valuing nonemployee share-based payment transactions. ##### [718-30-55-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:d754e3ef0c0ee960e5403be5f78b83da7c782546cb82fa51cf683d5d31056186 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Entity T, a [public entity](https://asc.understandingaccounting.org/glossary/p/#public-entity "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."), grants share appreciation rights with the same terms and conditions as those described in Example 1 (see paragraph [718-20-55-4](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-4)). As in Example 1, Case A, Entity T makes an accounting policy election in accordance with paragraph [718-10-35-3](https://asc.understandingaccounting.org/asc/718/10/#718-10-35-3) to estimate the number of forfeitures expected to occur and includes that estimate in its initial accrual of compensation costs. Each stock appreciation right entitles the holder to receive an amount in cash equal to the increase in value of 1 share of Entity T stock over $30. Entity T determines the grant-date [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.") of each stock appreciation right in the same manner as a [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.") and uses the same assumptions and option-pricing model used to estimate the fair value of the share options in that Example; consequently, the grant-date fair value of each stock appreciation right is $14.69 (see paragraphs [718-20-55-7 through 55-9](https://asc.understandingaccounting.org/asc/718/20/#718-20-55-7) ). The awards cliff-[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.") at the end of three years of service (an explicit and requisite service period of three years). The number of stock appreciation rights for which the requisite service is expected to be rendered is estimated 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.") to be 821,406 (900,000 ×.973). Thus, the fair value of the [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.") as of January 1, 20X5, is $12,066,454 (821,406 × $14.69). For simplicity, this Example assumes that estimated forfeitures equal actual forfeitures. ##### [718-30-55-3](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:778cfac5d311374cf8accb90c19e13b53db8343b697f7b0aa7a5b4e36a6058ac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [718-30-35-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-4) permits 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.") to measure share-based payment liabilities at either fair value (or, in some cases, [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.)"). If a nonpublic entity elects to measure those liabilities at fair value, the accounting demonstrated in this Example would be applicable. Paragraph [718-30-35-3](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-3) requires that share-based compensation liabilities be recognized at fair value or a portion thereof (depending on the percentage of requisite service rendered at the reporting date) and be remeasured at each reporting date through the date of [settlement](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."); consequently, compensation cost recognized during each year of the three-year vesting period (as well as during each year thereafter through the date of settlement) will vary based on changes in the award's fair value. As of December 31, 20X5, the assumed fair value is $10 per stock appreciation right; hence, the fair value of the award is $8,214,060 (821,406 × $10). The share-based compensation liability as of December 31, 20X5, is $2,738,020 ($8,214,060 ÷ 3) to account for the portion of the award related to the service rendered in 20X5 (1 year of the 3-year requisite service period). For convenience, this Example assumes that journal entries to account for the award are performed at year-end. The journal entries for 20X5 are as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-CB26116B-8E6D-4685-ABE4-843858F7D2D5-low.gif) Compensation cost " $2,738,020 " Share-based compensation liability " $2,738,020 " - To recognize compensation cost. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-EBFB3890-F71E-44AB-9819-4107E42071F7-low.gif) Deferred tax asset " $958,307 " Deferred tax benefit " $958,307 " - To recognize the deferred tax asset for the temporary difference related to compensation cost ($2,738,020 ×.35 = $958,307). ##### [718-30-55-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:8c0f3ed26b6d9cf933b5f4ae621f53bf16fd6c3391b10326a418d34ed2ed81e1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As of December 31, 20X6, the fair value is assumed to be $25 per stock appreciation right; hence, the award's fair value is $20,535,150 (821,406 × $25), and the corresponding liability at that date is $13,690,100 ($20,535,150 × 2/3) because service has been provided for 2 years of the 3-year requisite service period. Compensation cost recognized for the award in 20X6 is $10,952,080 ($13,690,100 - $2,738,020). Entity T recognizes the following journal entries for 20X6. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-4BDBCAC9-7CAC-4C07-861F-E57752F4F84A-low.gif) Compensation cost " $10,952,080 " Share-based compensation liability " $10,952,080 " - To recognize a share-based compensation liability of $13,690,100 and associated compensation cost. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-57D95D98-0C84-44FD-B25E-0A6E97D9F2A9-low.gif) Deferred tax asset " $3,833,228 " Deferred tax benefit " $3,833,228 " - To recognize the deferred tax asset for additional compensation cost ($10,952,080 ×.35 = $3,833,228). ##### [718-30-55-5](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:7655e2fc33a9dc4b94c9217d3f1c5cd75dfd4dda8a57e8c61e07f0eb28366d11 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As of December 31, 20X7, the fair value is assumed to be $20 per stock appreciation right; hence, the award's fair value is $16,428,120 (821,406 × $20), and the corresponding liability at that date is $16,428,120 ($16,428,120 × 1) because the award is fully vested. Compensation cost recognized for the liability award in 20X7 is $2,738,020 ($16,428,120 - $13,690,100). Entity T recognizes the following journal entries for 20X7. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-A69FC565-DB4D-4CC1-9C9B-1EC854D2CD21-low.gif) Compensation cost " $2,738,020 " Share-based compensation liability " $2,738,020 " - To recognize a share-based compensation liability of $16,428,120 and associated compensation cost. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-433FE134-37A9-477F-8DC2-9D777365A709-low.gif) Deferred tax asset " $958,307 " Deferred tax benefit " $958,307 " - To recognize the deferred tax asset for additional compensation cost ($2,738,020 ×.35 = $958,307). ##### [718-30-55-6](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:30683f31fc1a1f4ccfb793552b648d4be38df52ecb53589aef3e62f94df32b80 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The share-based liability award is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-0E7049D3-F753-4E2E-AE1C-B6EB9CE76F01-low.gif) Year Total Value of Award at Year-End Pretax Cost for Year Cumulative Pretax Cost 20X5 " $8,214,060 (821,406 × $10) " " $2,738,020 ($8,214,060 ÷ 3) " " $2,738,020 " 20X6 " $20,535,150 (821,406 × $25) " " $10,952,080 \[($20,535,150 × ⅔) - $2,738,020\] " " $13,690,100 " 20X7 " $16,428,120 (821,406 × $20) " " $2,738,020 ($16,428,120 - $13,690,100) " " $16,428,120 " ##### [718-30-55-7](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:29d48dc1fb5595fdf221a7e2dc56d347b4a3a49eea73b21b1c4baabbd8775e6d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For simplicity, this Example assumes that all of the stock appreciation rights are exercised on the same day, that the liability award's fair value is $20 per stock appreciation right, and that Entity T has already recognized its income tax expense for the year without regard to the effects of the exercise of the [employee](https://asc.understandingaccounting.org/glossary/e/#employee "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.") stock appreciation rights. In other words, current tax expense and current taxes payable were recognized based on taxable income and deductions before consideration of additional deductions from exercise of the stock appreciation rights. The amount credited to cash for the exercise of the stock appreciation rights is equal to the share-based compensation liability of $16,428,120. ##### [718-30-55-8](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:3503c74b6390e1181d7ed7ef90839fcce91490179eedff34cf728519b72b45d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At exercise the journal entry is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-C0DEAC2C-32D5-4C15-B6DC-F6C24354D237-low.gif) Share-based compensation liability " $16,428,120 " "Cash (821,406 × $20)" " $16,428,120 " - To recognize the cash payment to employees from stock appreciation right exercise. ##### [718-30-55-9](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:b8f515a51493ee0048c58ad1bb274500ef7c4ef2a7300a2083642b1d5a49f453 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The cash paid to the employees on the date of exercise is deductible for tax purposes. The tax benefit is $5,749,842 ($16,428,120 ×.35). ##### [718-30-55-10](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:d643dc42c213459bd23930d4065d61c9ff647a12101803801d75cb1bcca1423f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At exercise the journal entry is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-059C4340-002D-420F-A83B-8C9EB60D9A7A-low.gif) Deferred tax expense " $5,749,842 " Deferred tax asset " $5,749,842 " - To write off the deferred tax asset related to the stock appreciation rights. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-36DE8A00-C8A1-4459-98F9-876E6D9C3AD3-low.gif) Current taxes payable " $5,749,842 " Current tax expense " $5,749,842 " - To adjust current tax expense and current taxes payable to recognize the current tax benefit from deductible compensation cost. ##### [718-30-55-11](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:0e3a6b3b7507bde35f94291c9a2de4194a6082fdeca65ba4bebce32451965d62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the stock appreciation rights had expired worthless, the share-based compensation liability account and deferred tax asset account would have been adjusted to zero through the income statement as the award's fair value decreased. ##### [718-30-55-12](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:73c91879d96e6550d3b10df27bdcfcfabd276683962ccb4f07e6c5095ad45e8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraphs [718-30-35-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-4) and [718-740-25-2 through 25-4](https://asc.understandingaccounting.org/asc/718/740/#718-740-25-2) . ##### [718-30-55-12A](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-12A) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:8c41b1bb3615207a5ef1ba017f5d2f61de340dbb54bafbd9ddfd72604b763c18 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example (see paragraphs [718-30-55-13 through 55-20](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-13) ) describes employee awards. However, the principles on how to account for the various aspects of employee awards, except for the compensation cost attribution and certain inputs to valuation, are the same for nonemployee awards. Consequently, a nonpublic entity can make the accounting policy election in paragraph [718-30-30-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-2) to change its measurement of all liability-classified nonemployee awards from fair value to intrinsic value and remeasure those awards each reporting period as illustrated in this Example. Therefore, the guidance in this Example may serve as implementation guidance for similar liability-classified nonemployee awards. ##### [718-30-55-12B](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-12B) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:a9ccf9ab1190dfe89c0b7866dd2203bab147efd88c0444eaf26d0c78aa919a83 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Compensation cost attribution for awards to nonemployees may be the same or different for liability-classified employee awards. That is because an entity is required to recognize compensation cost for nonemployee awards in the same manner as if the entity had paid cash in accordance with paragraph [718-10-25-2C](https://asc.understandingaccounting.org/asc/718/10/#718-10-25-2C). Additionally, valuation amounts used in this Example could be different because an entity may elect to use the contractual term as the expected term of share options and similar instruments when valuing nonemployee share-based payment transactions. ##### [718-30-55-13](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:76d1a6091ae2d6b8e27419add0f9d90a9ae87178e9cf2ec3411801efdfbeedc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. On January 1, 20X6, Entity W, a nonpublic entity that has chosen the accounting policy of using the intrinsic value method of accounting for share-based payments that are classified as liabilities in accordance with paragraphs [718-30-30-2](https://asc.understandingaccounting.org/asc/718/30/#718-30-30-2) and [718-30-35-4](https://asc.understandingaccounting.org/asc/718/30/#718-30-35-4), grants 100 cash-settled stock appreciation rights with a 5-year life to each of its 100 employees. Each stock appreciation right entitles the holder to receive an amount in cash equal to the increase in value of 1 share of Entity W's stock over $7. The awards cliff-vest at the end of three years of service (an explicit and requisite service period of three years). For simplicity, the Example assumes that no forfeitures occur during the vesting period and does not reflect the accounting for income tax consequences of the awards. ##### [718-30-55-14](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:b97155a3c06394f75738793a651d33be2d45730359cdb8f567690891f6eb5bc1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because of Entity W's accounting policy decision to use intrinsic value, all of its share-based payments that are classified as liabilities are recognized at intrinsic value (or a portion thereof, depending on the percentage of requisite service that has been rendered) at each reporting date through the date of settlement; consequently, the compensation cost recognized in each year of the three-year requisite service period will vary based on changes in the liability award's intrinsic value. As of December 31, 20X6, Entity W stock is valued at $10 per share; hence, the intrinsic value is $3 per stock appreciation right ($10 - $7), and the intrinsic value of the award is $30,000 (10,000 × $3). The compensation cost to be recognized for 20X6 is $10,000 ($30,000 ÷ 3), which corresponds to the service provided in 20X6 (1 year of the 3-year service period). For convenience, this Example assumes that journal entries to account for the award are performed at year-end. The journal entry for 20X6 is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-7573FF28-4341-4BB4-8A82-4EF445F2CF2C-low.gif) Compensation cost " $10,000 " Share-based compensation liability " $10,000 " - To recognize compensation cost. ##### [718-30-55-15](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:87b083385a36e8ea238b97aaf35b05916ae491768e847546afdc9f5b8c07db7f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As of December 31, 20X7, Entity W stock is valued at $8 per share; hence, the intrinsic value is $1 per stock appreciation right ($8 - $7), and the intrinsic value of the award is $10,000 (10,000 × $1). The decrease in the intrinsic value of the award is $20,000 ($10,000 - $30,000). Because services for 2 years of the 3-year service period have been rendered, Entity W must recognize cumulative compensation cost for two-thirds of the intrinsic value of the award, or $6,667 ($10,000 × 2/3); however, Entity W recognized compensation cost of $10,000 in 20X5. Thus, Entity W must recognize an entry in 20X7 to reduce cumulative compensation cost to $6,667. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-CB07161A-CBAC-414A-BD77-C1DF5EA8894C-low.gif) Share-based compensation liability " $3,333 " Compensation cost " $3,333 " - To adjust cumulative compensation cost ($6,667 - $10,000). ##### [718-30-55-16](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:93eb080ee7d0b2f9c83750531c5768f9340675c642ff2a1d2c6f3b19a9c7c089 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As of December 31, 20X8, Entity W stock is valued at $15 per share; hence, the intrinsic value is $8 per stock appreciation right ($15 - $7), and the intrinsic value of the award is $80,000 (10,000 × $8). The cumulative compensation cost recognized as of December 31, 20X8, is $80,000 because the award is fully vested. The journal entry for 20X8 is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-D5E78D34-BE33-4F8D-88A7-91F204F74DA9-low.gif) Compensation cost " $73,333 " Share-based compensation liability " $73,333 " - To recognize compensation cost ($80,000 - $6,667). ##### [718-30-55-17](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:21769cc621f9224bfc92e7f0a41598ff10b23b2323e2c9896d37ca37392a792e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The share-based liability award at intrinsic value is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-5488AEED-EFE6-4E77-BF96-F0DB05715128-low.gif) Year Total Value of Award at Year-End Pretax Cost for Year Cumulative Pretax Cost 20X6 " $30,000 (10,000 × $3) " " $10,000 ($30,000 ÷ 3) " " $10,000 " 20X7 " $10,000 (10,000 × $1) " " $(3,333) \[($10,000 × ⅔) - $10,000\] " " $6,667 " 20X8 " $80,000 (10,000 × $8) " " $73,333 ($80,000 - $6,667) " " $80,000 " ##### [718-30-55-18](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:7cf24fa92077e5408c0b6005d39441d9ec01e327e83c2cbcc9d3f08691c0ac76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For simplicity, this Example assumes that all of the stock appreciation rights are settled on the day that they vest, December 31, 20X8, when the share price is $15 and the intrinsic value is $8 per share. The cash paid to settle the stock appreciation rights is equal to the share-based compensation liability of $80,000. ##### [718-30-55-19](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:65da71e1d562055be708c5daa5df2801e6447b0488f3838693562b46513dc72b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At exercise the journal entry is as follows. - ![ ](https://asc.understandingaccounting.org/asc-img/GUID-5F8BF85D-E99E-4E98-AD05-FE7D179889BD-low.gif) Share-based compensation liability " $80,000 " "Cash (10,000 × $8)" " $80,000 " - To recognize the cash payment to employees for settlement of stock appreciation rights. ##### [718-30-55-20](https://asc.understandingaccounting.org/asc/718/30/#718-30-55-20) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:10.387Z to 2026-09-10T01:05:10.387Z Record version: sha256:6919509c7ff912221972d38e123530b5c158cde46789c699339b2e6c7d6e3b16 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the stock appreciation rights had not been settled, Entity W would continue to remeasure those remaining awards at intrinsic value at each reporting date through the date they are exercised or otherwise settled. Source downloaded (UTC): 2026-09-10T01:05:14.990Z to 2026-09-10T01:05:14.990Z Record version: sha256:c9b05c1e154675e396dc72a7124f926881f691f58c95b3f8661d4831d9eb32b1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-S00: SEC 00 Status [Read section](https://asc.understandingaccounting.org/asc/718/30/#sec-00-status) SEC content: yes ##### [718-30-S00-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-S00-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:14.990Z to 2026-09-10T01:05:14.990Z Record version: sha256:94397fe2337dea952f42453737d266dc0e7a527e7d677ecb85b1e3876eadc9ee Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
718-30-S55-1AmendedAccounting Standards Update No. 2009-0408/26/2009
Source downloaded (UTC): 2026-09-10T01:05:17.157Z to 2026-09-10T01:05:17.157Z Record version: sha256:a0a0ec95960878b06361c0baf1f005147fcd1f35b0dc1079bf8dd66cd4836d1d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-30-S55: SEC 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/718/30/#sec-55-implementation-guidance-and-illustrations) SEC content: yes #### Certain Redeemable Financial Instruments Issued in Conjunction with Share-Based Payment Arrangements ##### [718-30-S55-1](https://asc.understandingaccounting.org/asc/718/30/#718-30-S55-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:17.157Z to 2026-09-10T01:05:17.157Z Record version: sha256:3c20442135a3d5e4c0b1acc5a5b3eebc95771fd6a24e4ac4249644e3bc9f20a2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See paragraph [718-10-S99-1](https://asc.understandingaccounting.org/asc/718/10/#718-10-S99-1), SAB Topic 14.E, and paragraph [480-10-S99-3A](https://asc.understandingaccounting.org/asc/480/10/#480-10-S99-3A), SEC Staff Announcement: Classification and Measurement of Redeemable Securities, for SEC Staff views on awards with redemption features issued in conjunction with share-based payment arrangements.