{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/718/40/#30-initial-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":"718-40","subtopic_title":"Employee Stock Ownership Plans","section":{"number":"30","label":"30 Initial Measurement","anchor":"30-initial-measurement","is_sec":false,"groups":[{"block":"Leveraged Employee Stock Ownership Plans","heading":null,"paragraphs":[{"citation":"718-40-30-1","para":"30-1","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_CE3C581E-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Regardless of the account charged (see paragraphs <div class=\"xref-range displayInline\"><a href=\"/asc/718/40/#718-40-25-11\" class=\"xref\">718-40-25-11 through 25-12</a></div>), the amount of the charge shall be based on fair values of <a href=\"/glossary/c/#committed-to-be-released-shares\" class=\"term\" title=\"Committed-to-be-released shares are shares that, although not legally released, will be released by a future scheduled and committed debt service payment and will be allocated to employees for service rendered in the current accounting period. The period of employee service to which shares relate is generally defined in the employee stock ownership plan documents. Shares are legally released from suspense and from serving as collateral for employee stock ownership plan debt as a result of payment of debt service. Those shares are required to be allocated to participant accounts as of the end of the employee stock ownership plan's fiscal year. Formulas used to determine the number of shares released can be based on either of the following: The ratio of the current principal amount to the total original principal amount (in which case unearned employee stock ownership plan shares and debt balance will move in tandem) The ratio of the current principal plus interest amount to the total original principal plus interest to be paid. Shares are released more rapidly under the second method than under the first. Tax law permits the first method only if the employee stock ownership plan debt meets certain criteria.\"><span>committed-to-be-released shares</span></a>. </span></span> </div> </div>","snippet":"Regardless of the account charged (see paragraphs 718-40-25-11 through 25-12), the amount of the charge shall be based on fair values of committed-to-be-released shares.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:877f7cbd1f3b6b1a8c34bd9c9f8179b08dea402eeb3ae98543c86afa158d3555","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}},{"citation":"718-40-30-2","para":"30-2","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_CE3C592A-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Some employers establish <a href=\"/glossary/e/#employee-stock-ownership-plan\" class=\"term\" title=\"An employee stock ownership plan is an employee benefit plan that is described by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 as a stock bonus plan, or combination stock bonus and money purchase pension plan, designed to invest primarily in employer stock. Also called an employee share ownership plan.\"><span>employee stock ownership plans</span></a> that are not linked to any other <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</span></a> benefit or compensation promise; therefore, the employee stock ownership plan shares directly compensate the employees. For employee stock ownership plan shares committed to be released to compensate employees directly, the employer shall recognize compensation cost equal to 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 the shares committed to be released. The shares generally shall be deemed to be committed to be released ratably during an accounting period as the employees perform services, and, accordingly, average fair values shall be used to determine the amount of compensation cost to recognize each reporting period (interim or annual). The amount of compensation cost recognized in previous interim periods shall not be adjusted for subsequent changes in the fair value of shares. </span></span> </div> </div>","snippet":"Some employers establish employee stock ownership plans that are not linked to any other employee benefit or compensation promise; therefore, the employee stock ownership plan shares directly compensate the employees. Fo…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:77b514df5baa439de215f0798fe35c518f6c7fbafef07feb3481c1265cad8273","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}},{"citation":"718-40-30-3","para":"30-3","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_CE3C5A15-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Unearned employee stock ownership plan shares shall be credited as shares are committed to be released based on the cost of the shares to the employee stock ownership plan. Employers shall charge or credit the difference between the fair value of shares committed to be released and the cost of those shares to the employee stock ownership plan to shareholders' equity in the same manner as gains and losses on sales of treasury stock (generally to additional paid-in capital). </span></span> </div> </div>","snippet":"Unearned employee stock ownership plan shares shall be credited as shares are committed to be released based on the cost of the shares to the employee stock ownership plan. Employers shall charge or credit the difference…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e1b130f951fe56c6d81796eab7ce6e52ec6fb58a8f5f282844063b6ad0ea2eb4","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}},{"citation":"718-40-30-4","para":"30-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"> <span class=\"sfragment\" id=\"sfr_CE3C5ADE-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 employee stock ownership plan shares is needed to apply certain provisions of this Subtopic.</span></span> </div> </div>","snippet":"The fair value of employee stock ownership plan shares is needed to apply certain provisions of this Subtopic.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ae5edc83d4ca8b398a55b81a2e4bcce55fa0499e73d363ea91e1d0621f6657b5","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:6a4e3c5602ed527d10649a2535d6ef33ba686961820fefed9f7e1f00b49192f3","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}},{"block":"Nonleveraged Employee Stock Ownership Plans","heading":null,"paragraphs":[{"citation":"718-40-30-5","para":"30-5","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_CE49F739-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Compensation cost shall be measured as 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 the shares contributed to or committed to be contributed to the <a href=\"/glossary/e/#employee-stock-ownership-plan\" class=\"term\" title=\"An employee stock ownership plan is an employee benefit plan that is described by the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 as a stock bonus plan, or combination stock bonus and money purchase pension plan, designed to invest primarily in employer stock. Also called an employee share ownership plan.\"><span>employee stock ownership plan</span></a> or as the cash contributed to or committed to be contributed to the employee stock ownership plan, as appropriate under the terms of the plan. </span></span></div></div>","snippet":"Compensation cost shall be measured as the fair value of the shares contributed to or committed to be contributed to the employee stock ownership plan or as the cash contributed to or committed to be contributed to the e…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:988269f0f426ed10f4f24acc43acf4cacbcb0883cc718bdad6efa2c87e789e6a","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:106e03ad62560c8e3a41ea3ba3e4d4a8cde95b91bdf0d70ebf8203132a98024a","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:376ade4cc0d49964bc1d134af6176874811d14a72101af65673cc4832a8ebf12","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:376ade4cc0d49964bc1d134af6176874811d14a72101af65673cc4832a8ebf12","downloaded_from":"2026-09-10T01:05:32.298Z","last_downloaded_at":"2026-09-10T01:05:32.298Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480610","source_sha256":"55ae501de80f9920581122b57930410f26feb75c8d0cb3471a727678eea15fd1"}}