In some situations, employees of a reporting entity receive stock-based awards from the reporting entity’s parent, or an entity under common control. The reporting entity typically recognizes compensation cost in its financial statements if the awards were issued for services to the reporting entity. For example, if employees of Subsidiary A receive shares of the parent entity for services provided to Subsidiary A, Subsidiary A should recognize compensation cost with an offsetting entry to equity, representing a capital contribution from the parent. For more information on accounting for share awards issued by a parent, see SC 1.6.

A reporting entity that recognizes stock-based compensation in its separate financial statements for stock-based awards granted by the parent, or an entity under common control granted to its employees, should disclose the information required by ASC 718 (see FSP 15.4). These disclosures should include only information about awards granted to the reporting entity’s employees.