← Glossary GLOSSARY

ASC 718

The US GAAP standard for stock-based compensation expense.

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The longer version

ASC 718 requires companies to recognize stock options, RSUs, and similar awards as compensation expense over the vesting period, based on the grant-date fair value. The expense lives on the P&L; the offsetting credit hits equity.

Why it matters in your books

If you grant equity, you have stock-based compensation expense whether or not it is in your books. Investors and acquirers expect to see it; QSBS calculations and 409A valuations depend on the grant-level data behind it.