Topic 718


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Topic 718 Stock Compensation

Topic ASC 815 (previously FASB Statement 123R) was issued by the Financial Accounting Standards Board (FASB) and has been effective since June 2005.

Topic 718 Stock Compensation, requires that all entities recognize the cost of employee stock options (ESOs) in their financial statements at fair value. Companies are required to select a valuation model to determine the fair value of employee stock options on the date they are granted to employees. This value is used to determine the amount of the compensation expense that will be recorded over the service period in which an employee earns the right to benefit from the options, also known as the vesting period. While the FASB has not specified a preference for a particular valuation technique, it lists a set of general guidelines for an acceptable model.

Topic 718 applies to all share-based payment transactions in which a company acquires goods or services by issuing company stock, or by incurring liabilities that are based on the fair value of the company's stock or are settled by issuing company stock.


We hope that this information will assist you, but it should not be used or relied upon as a substitute for your own independent research. For a more comprehensive view of the standards/requirements, please visit the respective issuer's website.