ASC 718 Software.
Comply with compensation accounting standards
Why Does ASC 718 Matter?
As employee compensation, equity grants are part of a company’s required tax disclosures. An ASC 718 or IFRS (for European companies) report is a standardized way for your organization to disclose equity packages and grants to employees and investors.
How Astrella Helps
Financial Reporting Capabilities
Astrella supports valuation, expense, diluted EPS and tax accounting capabilities for all equity award types.
Use configurable allocation templates for graded, straight-line, and retirement eligibility.
Maintain all expense reporting, templates, audit trails, and accounting resources on a single platform.
Your ASC 718 Questions, Answered
What is ASC 718?
Accounting Standards Codification (ASC) 718 is an accounting standard issued by the Financial Accounting Standards Board (FASB) that provides guidance on the accounting treatment of stock-based compensation. Specifically, ASC 718 (formerly known as FAS 123R) requires companies to recognize the fair value of stock-based compensation as an expense in their financial statements, rather than simply disclosing it in footnotes.
What Are the Requirements of ASC 718?
Some of the key requirements of ASC 718 include:
- Recognition of Compensation Expenses: Companies must recognize the fair value of stock-based compensation as an expense on their income statement, over the vesting period of the award.
- Estimation of the Fair Value: The fair value of stock-based compensation must be estimated using an appropriate valuation model and based on certain assumptions, including the expected term of the award, expected volatility of the company’s stock price, risk-free interest rate, and expected dividends.
- Vesting Period: Companies must determine the vesting period of the award. The vesting period can be based on service, performance, or a combination of both.
- Reassessment of Fair Value: Companies must reassess the fair value of stock-based compensation at each reporting period and adjust the compensation expense accordingly.
Because these requirements are so extensive, many companies use ASC 718 stock-based compensation reporting software to help them.
What is the Primary Objective of ASC 718?
The primary objective of ASC 718 is to provide guidance on accounting for share-based payment transactions in financial statements. The standard is issued by the FASB in the United States.
ASC 718 addresses various aspects of stock-based compensation, such as stock options, restricted stock units, stock appreciation rights, and other share-based awards granted to employees. The main objectives of ASC 718 are to enhance comparability of reports across companies, improve transparency of financial performance, and ensure consistency of treatment of stock compensation.
What is the Difference Between ASC 718 and IFRS 2?
ASC 718 and IFRS 2 are accounting standards that provide guidance on how to account for share-based payment transactions, such as stock options, restricted stock, and employee stock purchase plans. ASC 718 is issued by the FASB and primarily applies to companies based in the United States, whereas IFRS 2 is issued by the International Accounting Standards Board (IASB) and is used by companies following International Financial Reporting Standards (IFRS) globally.