ASC 718
Also called FAS 123R, share-based payment accounting.
The U.S. accounting standard for share-based payment. SCT stock and option columns use ASC 718 grant-date fair value, which is why CompensationBase labels amounts as grant-date fair value as reported.
What it is
ASC 718 is the U.S. accounting standard for share-based payment. It requires companies to measure equity awards at grant-date fair value and to recognize that amount as expense over the service (vesting) period. Option-pricing models, Monte Carlo simulations for market conditions, and the share price for plain RSUs all live under this standard.
Item 402 tells companies to use the same grant-date fair value in the SCT stock and option columns. CompensationBase labels amounts as grant-date fair value as reported because those columns follow this measurement—not because the site independently revalues awards.
Why companies use it
Financial statements need a consistent way to expense options and RSUs. ASC 718 replaced older intrinsic-value approaches that left at-the-money options with little or no expense.
Using the same number in the proxy and the income statement reduces dueling “values” for the same grant, even though expense is recognized over time and the SCT shows the full grant-date amount in year one.
Pros
- One measurement language for accountants and proxy readers.
- Makes option grants visibly expensive, which changed mix toward RSUs.
- Assumptions (volatility, term) are disclosable and auditable.
Cons
- Model value is not market cash.
- Forfeiture estimates and performance probabilities can move expense without a new grant.
- SCT year-one reporting of the full grant-date amount still shocks readers who think in P&L amortization.
Examples
RSU expense vs SCT
A $12 million RSU grant vesting over three years might hit the P&L at about $4 million per year (ignoring forfeitures). The SCT Stock Awards column in the grant year still shows about $12 million.
Option assumptions
Two companies granting similar options can report different fair values if one assumes higher volatility or a longer expected term. Footnotes list those assumptions.
On CompensationBase
CompensationBase labels amounts as grant-date fair value as reported because SCT equity columns follow this accounting standard.
Related terms
- Grant-date fair value
The accounting value of equity awards on the day they are granted, which is what the Summary Compensation Table reports for stock and option awards—not the value later realized when shares vest or are sold.
- Stock awards
The grant-date fair value of stock-based awards (typically RSUs, restricted stock, and PSUs) reported in the SCT Stock Awards column.
- Option awards
The grant-date fair value of stock options and stock appreciation rights reported in the SCT Option Awards column.