Accounting

ASC 718

Quick definition

GAAP rules for expensing stock-based compensation.

ASC 718 governs how companies recognize compensation expense for equity awards (options, RSUs). Expense equals grant-date fair value spread over the service (vesting) period, with adjustments for forfeitures. Drives a significant non-cash expense on most startup P&Ls.

Related accounting terms

ASC 606
GAAP revenue recognition standard for contracts with customers.
ASC 842
GAAP standard requiring leases to be recognized on the balance sheet.
Deferred Revenue
Cash received in advance of delivering the service.
Accrual vs. Cash Accounting
Accrual recognizes revenue/expense when earned; cash when money moves.

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