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ASC 718 — Compensation — Stock Compensation

Below is an overview of FASB Accounting Standards Codification Topic 718, Compensation—Stock Compensation, as well as a list of FASB Accounting Standards Updates (ASUs) and proposed ASUs related to this Topic.


ASC 718 comprises six Subtopics (Overall, Awards Classified as Equity, Awards Classified as Liabilities, Employee Stock Ownership Plans, and Income Taxes). Below is an overview of each Subtopic.


718-10 Overall

ASC 718-10 notes that it "provides general guidance related to share-based payment arrangements with employees."


718-20 Awards Classified as Equity

ASC 718-20 notes that it provides guidance for share-based payment awards that are classified as equity. It also notes that it is "interrelated with Subtopic 718-10, which contains guidance applicable to instruments classified as either equity or liabilities issued in share-based payment transactions."


718-30 Awards Classified as Liabilities

ASC 718-30 notes that it provides guidance for share-based payment awards that are classified as liability, but it is also interrelated to ASC 718-10 that contains guidance on awards classified as liabilities and equity.


718-40 Employee Stock Ownership Plans

ASC 718-40 includes guidance on employee stock ownership plans and notes the following purposes for entities using these plans:


  1. To fund a matching program for a sponsor's 401(k) saving plan, formula-based profit-sharing plan, and other employee benefits
  2. To raise new capital or to create a marketplace for the existing stock
  3. To replace lost benefits from the termination of other retirement plans or provide benefits under postretirement benefit plans, particularly medical benefits
  4. To be part of the financing package in leveraged buy-outs
  5. To provide a tax-advantaged means for owners to terminate their ownership
  6. To be part of a long-term program to restructure the equity section of a plan sponsor's balance sheet
  7. To defend the entity against hostile takeovers.

718-50 Employee Share Purchase Plans

ASC 718-50 notes that it provides guidance to entities that have employee share purchase plans, but entities "must first determine whether the plan is compensatory or noncompensatory."


718-740 Income Taxes

ASC 718-740 notes the following:


This Subtopic addresses the accounting for current and deferred income taxes that results from share-based payment arrangements, including employee stock ownership plans.

This Subtopic specifically addresses the accounting requirements that apply to the following:

  1. 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
  2. The recognition of tax benefits when tax deductions differ from recognized compensation cost
  3. The presentation required for income tax benefits from share-based payment arrangements.

The full text of ASC 718 can be found in the FASB Accounting Standards Codification (link to the FASB's Web site; registration required). Also, the full text of the Codification and Deloitte-authored Q&As related to the Codification are available in Deloitte's Accounting Research Tool (DART) Web site (subscription required).

Content from the FASB Accounting Standards Codification® included at is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with permission.

FASB Accounting Standards Updates

The following ASUs amended the guidance in this Topic:

Proposed FASB Accounting Standards Updates

    The following are proposed amendments to ASC 718:

    Correction list for hyphenation

    These words serve as exceptions. Once entered, they are only hyphenated at the specified hyphenation points. Each word should be on a separate line.