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.
Frequently asked questions
- What is ASC 718?
- 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.
- Why is ASC 718 important for startups?
- ASC 718 is a accounting concept that matters for startup founders because it directly affects fundraising readiness, financial decision-making, or operational discipline at the stage where mistakes are expensive to undo. Founders who understand it have a meaningfully easier time in diligence, board meetings, and investor conversations.
- What category does ASC 718 belong to?
- ASC 718 is a Accounting term in the StartupCFO finance glossary — alongside other accounting concepts that founders, CFOs, and accountants use in daily startup operations and reporting.
- Where can I learn more about ASC 718?
- Beyond this definition, see the related accounting terms below, or explore StartupCFO's insights and tools that put ASC 718 in context. For specific situations, talk to a fractional CFO who can walk through your numbers.
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