FASB ASC 718 – Stock Based Compensation

The Financial Accounting Standards Board (FASB) released Accounting Standards Codification 718 (ASC 718) to address the compensation of employees with equity stock in the company.

Several companies have programs which give shares of stock to employees in addition to a normal salary, and in some less common circumstances, instead of a salary.

Because this compensation can include stock options which are difficult to value, it was important for this to be addressed specifically.  Also, as key members of management may have an interest in baking the numbers to increase the value of the shares, it is important to make sure the compensation is taken into account on the financial statements as to not under report liabilities and expenses.

For more in depth information on this and other FASB ASC topics, check out the following books.

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