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ASC 718 Stock Comp ExpenseGraded (Accelerated) vs Straight-Line

What do these figures come to once the work is shown?

Year-by-year expense for an award with equal annual vesting tranches under both attribution methods, with forfeitures.

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Your figures
Example figuresIllustrative only. Type over them with your own.
Graded (accelerated) expense for the year
$62,500
Each tranche over its own vesting period
Straight-line expense for the year
$30,000
Year 1
Graded cumulative through year 1
$62,500
Drawn to one scale
Graded (accelerated) expense for the year$62,500
Straight-line expense for the year$30,000
Graded cumulative through year 1$62,500
Straight-line cumulative through year 1$30,000
Vested portion through year 1$30,000
Total expense after forfeitures$120,000
All results
MeasureResult
Graded (accelerated) expense for the year
Year 1
$62,500
Straight-line expense for the year
Year 1
$30,000
Graded cumulative through year 1$62,500
Straight-line cumulative through year 1$30,000
Vested portion through year 1
Straight-line cumulative must be at least this
$30,000
Total expense after forfeitures$120,000
How this was worked out
Work shownrecomputed as you type
Tranche value = total fair value x (1 - forfeitures) / tranches
Graded: tranche j expensed evenly over j years; year expense = sum of tranches still vesting / their years
Straight-line: total / tranches each year, with cumulative expense at least the vested portion

Illustrative arithmetic on the figures you enter. Check the result against your firm's methodology before relying on it.

The formulas

  • Tranche value = total fair value x (1 - forfeitures) / tranches
  • Graded: tranche j expensed evenly over j years; year expense = sum of tranches still vesting / their years
  • Straight-line: total / tranches each year, with cumulative expense at least the vested portion

How it works

For awards with only service conditions and graded vesting, ASC 718-10-35-8 allows a policy election: recognize cost straight-line over the requisite service period of each separately vesting tranche (the accelerated or graded method), or straight-line over the total period. Under straight-line the cumulative cost at any date must be at least the grant-date value of the portion vested.

ASU 2016-09 added the entity-wide election to estimate forfeitures or to recognize them as they occur. Enter 0 for forfeitures if you recognize them as they occur.

Illustrative figures only. Check the result against your firm's methodology before relying on it.

Common questions

Can performance-condition awards use straight-line over the whole period?

No. The election in ASC 718-10-35-8 applies to awards with only service conditions.

Why is year 1 graded expense so much larger?

Every tranche is vesting in year 1, and the first tranche is expensed entirely in that year.

Does the method change total expense?

No. Only the timing differs. Total expense is the grant-date fair value of awards that vest.

Sources

Runs in your browser. The figures you type are not sent to CORAA or stored. Check the result against your firm's methodology before relying on it.

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