{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/718/740/#05-overview-and-background","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":"718-740","subtopic_title":"Income Taxes","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"718-740-05-1","para":"05-1","html":"<div class=\"asc-body\"><div class=\"norm-text\">Topic <a altsource=\"GUID-536ACE12-AE3B-4036-B02C-E0B2A90A3E70.ditamap\" class=\"ditamap\">740</a> addresses the majority of tax accounting issues and differences between the financial reporting (or book) basis and tax basis of assets and liabilities (basis differences).</div></div>","snippet":"Topic 740 addresses the majority of tax accounting issues and differences between the financial reporting (or book) basis and tax basis of assets and liabilities (basis differences).","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9cb3572075396507812824cb9ee62372e3062686acaf06af2f7e090f4c7576dc","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}},{"citation":"718-740-05-2","para":"05-2","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Subtopic addresses the accounting for current and deferred <a href=\"/glossary/i/#income-taxes\" class=\"term\" title=\"Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.\"><span>income taxes</span></a> that results from <a href=\"/glossary/s/#share-based-payment-arrangements\" class=\"term\" title=\"An arrangement under which either of the following conditions is met: One or more suppliers of goods or services (including employees) receive awards of equity shares, equity share options, or other equity instruments. The entity incurs liabilities to suppliers that meet either of the following conditions: The amounts are based, at least in part, on the price of the entity's shares or other equity instruments. (The phrase at least in part is used because an award may be indexed to both the price of the entity's shares and something other than either the price of the entity's shares or a market, performance, or service condition.) The awards require or may require settlement by issuance of the entity's shares. The term shares includes various forms of ownership interest that may not take the legal form of securities (for example, partnership interests), as well as other interests, including those that are liabilities in substance but not in form. Equity shares refers only to shares that are accounted for as equity. Also called share-based compensation arrangements.\"><span>share-based payment arrangements</span></a>, including <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>.</div></div>","snippet":"This Subtopic addresses the accounting for current and deferred income taxes that results from share-based payment arrangements, including employee stock ownership plans.","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:9fb8ba7a32cfc2cdc6f44ab159877c7a41f06bf7d0fb4e2f22103a08eb8c3800","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}},{"citation":"718-740-05-3","para":"05-3","html":"<div class=\"asc-body\"><div class=\"norm-text\">This Subtopic specifically addresses the accounting requirements that apply to the following:<ol class=\"ol-norm\"><li class=\"li-norm\"><span class=\"linum\">a</span><div class=\"p\">The determination of the basis differences which result from tax deductions arising in different amounts and in different periods from compensation cost recognized in financial statements </div></li><li class=\"li-norm\"><span class=\"linum\">b</span><div class=\"p\">The recognition of tax benefits when tax deductions differ from recognized compensation cost</div></li><li class=\"li-norm\"><span class=\"linum\">c</span><div class=\"p\">The presentation required for income tax benefits from share-based payment arrangements.</div></li></ol></div></div>","snippet":"This Subtopic specifically addresses the accounting requirements that apply to the following:\n(a) The determination of the basis differences which result from tax deductions arising in different amounts and in different …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3df04e3e9d84ccc49f49c2120537b2a4ba136bdb4b7364e7b0618a71784248a2","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}},{"citation":"718-740-05-4","para":"05-4","html":"<div class=\"asc-body\"><div class=\"norm-text\"><span class=\"sfragment\" id=\"sfr_D01D0077-6E93-1014-A13F-6E4B94C84136\"><span class=\"sfragment-source\">Income tax regulations specify allowable tax deductions for instruments issued under share-based payment arrangements in determining an entity's income tax liability. For example, under tax law, allowable tax deductions may be measured as the <a href=\"/glossary/i/#intrinsic-value\" class=\"term\" title=\"The amount by which the fair value of the underlying stock exceeds the exercise price of an option. For example, an option with an exercise price of $20 on a stock whose current market price is $25 has an intrinsic value of $5. (A nonvested share may be described as an option on that share with an exercise price of zero. Thus, the fair value of a share is the same as the intrinsic value of such an option on that share.)\"><span>intrinsic value</span></a> of an instrument on a specified date. The <a href=\"/glossary/t/#time-value\" class=\"term\" title=\"The portion of the fair value of an option that exceeds its intrinsic value. For example, a call option with an exercise price of $20 on a stock whose current market price is $25 has intrinsic value of $5. If the fair value of that option is $7, the time value of the option is $2 ($7 - $5).\"><span>time value</span></a> component, if any, of the <a href=\"/glossary/f/#fair-value\" class=\"term\" title=\"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.\"><span>fair value</span></a> of an instrument generally may not be tax deductible. Therefore, tax deductions may arise in different amounts and in different periods from compensation cost recognized in financial statements. </span></span>Similarly, the amount of expense reported for an employee stock ownership plan during a period may differ from the amount of the related income tax deduction prescribed by income tax rules and regulations.</div></div>","snippet":"Income tax regulations specify allowable tax deductions for instruments issued under share-based payment arrangements in determining an entity's income tax liability. For example, under tax law, allowable tax deductions …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:b93928680fad26251913a982b5d425ca050ab1af85d5d2143fac0e14e2401f00","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:41fa387938edb59bba43e29a43d7d3d20ca8d954fa5d6cc986023871c417ec8d","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70d4a1636ed8ca9342f4fcabde04ac3637e39d0fbc923b7e9cf3d4353d1c0b64","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:70d4a1636ed8ca9342f4fcabde04ac3637e39d0fbc923b7e9cf3d4353d1c0b64","downloaded_from":"2026-09-10T01:06:25.794Z","last_downloaded_at":"2026-09-10T01:06:25.794Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147479099","source_sha256":"9c2e364abf1e01c0478fb88256874f9e9dae2b31882e7759fd101c73e2ff527f"}}