grant-date fair value

ASC 505-50 formerly governed the accounting for equity instruments (shares, options, warrants) issued to non-employees in exchange for goods or services, including measurement date, performance commitment, and counterparty-performance concepts. Every paragraph in the subtopic has been superseded — chiefly by ASU 2018-07 (Improvements to Nonemployee Share-Based Payment Accounting), with the share-based-payment-as-consideration-payable-to-a-customer paragraphs superseded earlier by ASU 2014-09 (Revenue from Contracts with Customers). As a result, the subtopic contains no operative guidance; nonemployee share-based payment awards are now accounted for under ASC 718.

ASC 718-10 is the "Overall" subtopic for share-based payment arrangements, setting the pervasive scope, recognition, measurement, classification, and disclosure principles that apply to both equity- and liability-classified awards granted to employees and nonemployees (and, by cross-reference, to customers). Its core rule is that cost must be recognized for all share-based payment transactions using a fair-value-based measurement method, generally grant-date fair value of the equity instruments issued (or fair value of liabilities incurred), recognized as the goods are obtained or services are received (718-10-10-2; 718-10-25-2; 718-10-30-3). Classification as liability or equity follows Topic 480 criteria as modified by 718-10-25-8 through 25-19A, and performance conditions are accrued based on the probable outcome while market conditions are reflected in grant-date fair value.

ASC 718-50 governs employee share purchase plans (ESPPs), including Section 423-style plans. Its core rule is a three-part test in 718-50-25-1: a plan is noncompensatory only if (a) its terms are no more favorable than those available to all holders of the same class of shares or the discount does not exceed the per-share cost of raising capital publicly (a 5% or smaller discount is automatically acceptable), (b) substantially all employees meeting limited employment qualifications may participate on an equitable basis, and (c) the plan has no option features other than two narrow exceptions. If the plan is compensatory (e.g., it has a look-back feature), grant-date fair value is measured by valuing the award as the sum of its separate components, and the requisite service period is the period over which the employee participates and pays for the shares.