Share-Based Payment, also known as ASC 718, refers to the accounting standard issued by the Financial Accounting Standards Board (FASB) that governs the treatment and disclosure of stock-based compensation plans offered by companies to their employees and other parties. These plans often include stock options, restricted stock units (RSUs), and other equity-based incentives. ASC 718 establishes guidelines for measuring the fair value of these share-based awards, recognizing their expenses in financial statements, and providing relevant disclosures to stakeholders. By adhering to this standard, companies can accurately account for and report the impact of share-based compensation on their financial performance, ensuring transparency and comparability in financial statements.
Employee Stock Options
Restricted Stock Units (RSUs)
Performance-Based Equity Plans
Employee Share Purchase Plans (ESPPs)
Stock Appreciation Rights (SARs)
Equity Compensation for Non-Employees
Equity-Based Incentives for Mergers and Acquisitions
Accurate Financial Reporting: Clear guidelines for valuing and recognizing share-based compensation ensure accurate financial reporting.
Incentive Alignment: Share-based compensation aligns the interests of employees and stakeholders with those of shareholders, motivating long-term company success.
Retention of Talent: Equity incentives serve as powerful tools for attracting and retaining top talent, encouraging employee loyalty through vesting periods.
Conservation of Cash: Share-based payment plans allow companies to reward employees with equity instead of cash, conserving valuable financial resources.
Tax Benefits: Certain equity plans may offer tax advantages for both the company and employees, enhancing the appeal of share-based compensation.