requisite service period and forfeitures

Expenses6

1. 718-10Overall718 Compensation—Stock Compensation

   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.

2. 718-20Awards Classified as Equity718 Compensation—Stock Compensation

   ASC 718-20 governs the subsequent measurement of share-based payment awards that are classified as equity (liability-classified awards go to 718-30, and general recognition/measurement rules stay in 718-10). Its core rules address awards whose grant-date fair value cannot be reasonably estimated (intrinsic value remeasurement through settlement), clawback and other contingent features (accounted for only when the contingent event occurs), and — most importantly — modification accounting, under which a modification is treated as an exchange of the original award for a new one, with incremental cost measured as the excess of the modified award's fair value over the original award's fair value immediately before modification. It also covers repurchases, cancellations, and cancellation-and-replacement transactions.

3. 718-30Awards Classified as Liabilities718 Compensation—Stock Compensation

   ASC 718-30 governs share-based payment awards that are classified as liabilities rather than equity (e.g., cash-settled stock appreciation rights). Liability awards use the same grant-date measurement objective as equity awards, but the measurement date is the settlement date, so the liability is remeasured at fair value (or intrinsic value if a nonpublic entity so elects) at every reporting date through settlement. Changes in value during the requisite service (or nonemployee vesting) period are recognized as compensation cost in proportion to service rendered; changes after that period are expensed immediately in the period of change.

4. 718-40Employee Stock Ownership Plans718 Compensation—Stock Compensation

   ASC 718-40 governs the employer's (sponsor's) accounting for employee stock ownership plans (ESOPs), distinguishing leveraged from nonleveraged plans. For leveraged ESOPs, the employer records the ESOP's outside debt as its own debt, charges shares issued to the ESOP to a contra-equity account ("unearned ESOP shares"), and recognizes compensation cost at the fair value of shares as they are committed to be released; for nonleveraged ESOPs, compensation cost equals the contribution called for in the period. It also prescribes dividend treatment (allocated shares to retained earnings; unallocated shares as debt reduction or compensation cost), EPS treatment, termination accounting, and disclosures.

5. 718-50Employee Share Purchase Plans718 Compensation—Stock Compensation

   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.

6. 718-740Income Taxes718 Compensation—Stock Compensation

   ASC 718-740 governs the income tax accounting consequences of share-based payment arrangements, including employee stock ownership plans. Cumulative compensation cost recognized for awards that ordinarily generate a future tax deduction creates a deductible temporary difference and a deferred tax asset (718-740-25-2, 25-4), measured on book compensation cost rather than the shares' current fair value. When the actual tax deduction is finally determined (typically at exercise, expiration, or vesting), any difference between it and cumulative book compensation cost is recognized as income tax expense or benefit in the income statement (718-740-35-2).