# ASC 718-40-45: Compensation—Stock Compensation — Employee Stock Ownership Plans — 45 Other Presentation Matters Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/718/40/#45-other-presentation-matters) 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): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:0febae4117968043efa3b41f285c418a4342078f1cd4b68a7d61469845289bac Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 718-40-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/718/40/#45-other-presentation-matters) SEC content: no #### EPS ##### [718-40-45-1](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:f3bdb1ca6a7488f52f59eec0fc447d3c8865a315ebf5c14e6cc8b9b94488c8c5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Dividends on preferred stock held by an [employee stock ownership plan](https://asc.understandingaccounting.org/glossary/e/#employee-stock-ownership-plan "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.") 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). #### Issuance of Shares or the Sale of Shares to an Employee Stock Ownership Plan ##### [718-40-45-2](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:62e2039f5e93a4132e3f671c7c1dff0906803921b822b54e817c952b5696db4f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [718-40-25-10](https://asc.understandingaccounting.org/asc/718/40/#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. ### Leveraged Employee Stock Ownership Plans #### EPS ##### [718-40-45-3](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:ac64c452a2d65150d00df713ada37e85cd6ef1a1b4adf6bdf7307d9782ecde8d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For purposes of computing basic and diluted earnings per share (EPS), [employee stock ownership plan](https://asc.understandingaccounting.org/glossary/e/#employee-stock-ownership-plan "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.") shares that have been [committed to be released](https://asc.understandingaccounting.org/glossary/c/#committed-to-be-released-shares "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.") shall be considered outstanding. Employee stock ownership plan shares that have not been committed to be released shall not be considered outstanding. ##### [718-40-45-4](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:d9d155b419f6964a090dac9fd9928c816e5b286ae98502e4964ab6d0b3de0b24 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](https://asc.understandingaccounting.org/glossary/a/#allocated-shares "Allocated shares are shares in an employee stock ownership plan trust that have been assigned to individual participant accounts based on a known formula. Internal Revenue Service (IRS) rules require allocations to be nondiscriminatory generally based on compensation, length of service, or a combination of both. For any particular participant such shares may be vested, unvested, or partially vested.") had been converted to common stock at the beginning of the period. ##### [718-40-45-5](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:9513e0cda19057afa94f0ebb5d26761a95a354131051c53d1519a0dd2c8ab4ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Prior period EPS shall not be restated for changes in the conversion rates. ##### [718-40-45-6](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:9fb33ba9073b9816db1f271724556a5602d0f3896d8defc75c22f526ed1a8ccc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ##### [718-40-45-7](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:770f7eec8f54d324ced0e126082af66a1200aa736900aae73ebaaa184302fadc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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](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 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. ##### [718-40-45-8](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:9f01710e6e8c29d2b7ae2d50a772f92946fc7ec9711939cbac0dca2aceddf76a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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. ### Nonleveraged Employee Stock Ownership Plans ##### [718-40-45-9](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:05:41.728Z to 2026-09-10T01:05:41.728Z Record version: sha256:1f6064b820ef0fef37752cb42b3ec3b61997737c58259b7a7a6878313bce755e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. All shares held by a nonleveraged [employee stock ownership plan](https://asc.understandingaccounting.org/glossary/e/#employee-stock-ownership-plan "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.") shall be treated as outstanding in computing the employer's earnings per share (EPS), except the [suspense account shares](https://asc.understandingaccounting.org/glossary/s/#suspense-shares "The shares initially held by the employee stock ownership plan in a suspense account are called suspense shares. Suspense shares are shares that have not been released, committed to be released, or allocated to participant accounts. Suspense shares generally collateralize employee stock ownership plan debt.") 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](https://asc.understandingaccounting.org/asc/718/40/#718-40-45-6) for leveraged employee stock ownership plans shall be considered.