{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/718/40/#45-other-presentation-matters","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":"45","label":"45 Other Presentation Matters","anchor":"45-other-presentation-matters","is_sec":false,"groups":[{"block":null,"heading":"EPS","paragraphs":[{"citation":"718-40-45-1","para":"45-1","html":"
Dividends on preferred stock held by an employee stock ownership plan shall be deducted from net income net of any applicable income tax benefit when computing both basic and diluted earnings per share (EPS) if that preferred stock is considered outstanding (that is, if the employee stock ownership plan shares are allocated).
","snippet":"Dividends on preferred stock held by an employee stock ownership plan shall be deducted from net income net of any applicable income tax benefit when computing both basic and diluted earnings per share (EPS) if that pref…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:f3bdb1ca6a7488f52f59eec0fc447d3c8865a315ebf5c14e6cc8b9b94488c8c5","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1de43322ed1dc42dbe781ac419f9a3b5794e73633e86ee76aa7c3772edaca90e","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"block":null,"heading":"Issuance of Shares or the Sale of Shares to an Employee Stock Ownership Plan","paragraphs":[{"citation":"718-40-45-2","para":"45-2","html":"
Paragraph 718-40-25-10 states that an employer shall report the issuance of shares or the sale of treasury shares to an employee stock ownership plan when they occur and shall report a corresponding charge to unearned employee stock ownership plan shares, a contra-equity account. That account should be presented as a separate item in the balance sheet.
","snippet":"Paragraph 718-40-25-10 states that an employer shall report the issuance of shares or the sale of treasury shares to an employee stock ownership plan when they occur and shall report a corresponding charge to unearned em…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:62e2039f5e93a4132e3f671c7c1dff0906803921b822b54e817c952b5696db4f","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:67e53a909abe3cc2e0dbf8bd4326b8ba6f1c031c03eec0d1b4d3fffb0ece27ec","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"block":"Leveraged Employee Stock Ownership Plans","heading":"EPS","paragraphs":[{"citation":"718-40-45-3","para":"45-3","html":"
For purposes of computing basic and diluted earnings per share (EPS), employee stock ownership plan shares that have been committed to be released shall be considered outstanding. Employee stock ownership plan shares that have not been committed to be released shall not be considered outstanding.
","snippet":"For purposes of computing basic and diluted earnings per share (EPS), employee stock ownership plan shares that have been committed to be released shall be considered outstanding. Employee stock ownership plan shares tha…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:ac64c452a2d65150d00df713ada37e85cd6ef1a1b4adf6bdf7307d9782ecde8d","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"citation":"718-40-45-4","para":"45-4","html":"
Employers that use dividends on allocated employee stock ownership plan shares to pay debt service shall adjust earnings applicable to common shares in the if-converted computation for the difference (net of income taxes) between the amount of compensation cost reported and the amount of compensation cost that would have been reported if the allocated shares had been converted to common stock at the beginning of the period.
","snippet":"Employers that use dividends on allocated employee stock ownership plan shares to pay debt service shall adjust earnings applicable to common shares in the if-converted computation for the difference (net of income taxes…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:d9d155b419f6964a090dac9fd9928c816e5b286ae98502e4964ab6d0b3de0b24","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"citation":"718-40-45-5","para":"45-5","html":"
Prior period EPS shall not be restated for changes in the conversion rates.
","snippet":"Prior period EPS shall not be restated for changes in the conversion rates.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9513e0cda19057afa94f0ebb5d26761a95a354131051c53d1519a0dd2c8ab4ae","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"citation":"718-40-45-6","para":"45-6","html":"
The number of common shares that will be issued on conversion of the convertible shares held by an employee stock ownership plan that have been committed to be released shall be deemed outstanding in the if-converted EPS computations for diluted EPS if the effect is dilutive. Convertible preferred shares held by the employee stock ownership plan that have not been committed to be released shall not be considered outstanding and, accordingly, would be excluded from the if-converted computations for diluted EPS.
","snippet":"The number of common shares that will be issued on conversion of the convertible shares held by an employee stock ownership plan that have been committed to be released shall be deemed outstanding in the if-converted EPS…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fb33ba9073b9816db1f271724556a5602d0f3896d8defc75c22f526ed1a8ccc","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"citation":"718-40-45-7","para":"45-7","html":"
When participants withdraw account balances containing convertible preferred shares from an employee stock ownership plan, they may be entitled to receive common shares or cash with a value equal to either the fair value of the convertible preferred shares or a stated minimum value per share. Accordingly, if the value of the common stock issuable is less than the stated minimum value or the fair value of the preferred, participants may receive common shares or cash with a value greater than the value of the common shares issuable at the stated conversion rate. In determining EPS, the employer shall presume that such a shortfall will be made up with shares of common stock. However, that presumption may be overcome if past experience or a stated policy provides a reasonable basis to believe that the shortfall will be paid in cash. In applying the if-converted method, the number of common shares issuable on assumed conversion, which shall be included in the denominator of the EPS calculation, shall be the greater of the following:
  1. a
    The shares issuable at the stated conversion rate
  2. b
    The shares issuable if the participants were to withdraw the shares from their accounts.
","snippet":"When participants withdraw account balances containing convertible preferred shares from an employee stock ownership plan, they may be entitled to receive common shares or cash with a value equal to either the fair value…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:770f7eec8f54d324ced0e126082af66a1200aa736900aae73ebaaa184302fadc","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"citation":"718-40-45-8","para":"45-8","html":"
Shares issuable on assumed withdrawal shall be computed based on the ratio of the average fair value of the convertible stock (or, if greater, its stated minimum value) to the average fair value of the common stock.
","snippet":"Shares issuable on assumed withdrawal shall be computed based on the ratio of the average fair value of the convertible stock (or, if greater, its stated minimum value) to the average fair value of the common stock.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9f01710e6e8c29d2b7ae2d50a772f92946fc7ec9711939cbac0dca2aceddf76a","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:24f1b26941ac5c34a2b72592cf1c528656e38129c0060dbe0cc382ef1a50abc0","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},{"block":"Nonleveraged Employee Stock Ownership Plans","heading":"EPS","paragraphs":[{"citation":"718-40-45-9","para":"45-9","html":"
All shares held by a nonleveraged employee stock ownership plan shall be treated as outstanding in computing the employer's earnings per share (EPS), except the suspense account shares of a pension reversion employee stock ownership plan, which are not treated as outstanding until they are committed to be released for allocation to participant accounts. If a nonleveraged employee stock ownership plan holds convertible preferred stock, the guidance in paragraphs
718-40-45-6 through 45-8
for leveraged employee stock ownership plans shall be considered.
","snippet":"All shares held by a nonleveraged employee stock ownership plan shall be treated as outstanding in computing the employer's earnings per share (EPS), except the suspense account shares of a pension reversion employee sto…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:1f6064b820ef0fef37752cb42b3ec3b61997737c58259b7a7a6878313bce755e","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:18594e769cd1b6c226d7428fead6d1bcc9970e5ba33b9d9d9324b0c76c070c9a","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0febae4117968043efa3b41f285c418a4342078f1cd4b68a7d61469845289bac","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:0febae4117968043efa3b41f285c418a4342078f1cd4b68a7d61469845289bac","downloaded_from":"2026-09-10T01:05:41.728Z","last_downloaded_at":"2026-09-10T01:05:41.728Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147480520","source_sha256":"19db7e47fad606c92a6ad48f52e067416ee72424da3d4aa59e9f39f0ca3e9d28"}}