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Prior to adoption of ASU 2018-07,CompensationStock Compensation: Improvements to Nonemployee Share-Based Payment Accounting, stock-based compensation awards granted to non-employees are subject to the measurement and presentation guidance in ASC 505-50, Equity-Based Payments to Non-Employees. A reporting entity that grants awards to non-employees should provide disclosures similar to those required by ASC 718 if that information is important to understanding the effects of the transaction on the financial statements. ASU 2018-07 largely aligns the accounting for share-based payment awards issued to nonemployees with the guidance applicable to grants to employees and explicitly includes nonemployee awards in the scope of ASC 718 disclosures. As many reporting entities already follow the disclosure requirements in ASC 718 for nonemployee awards by analogy to the requirements for employee awards, we do not expect the adoption of ASU 2018-07 to have a significant impact on disclosure.
The amendments in ASU 2018-07 are effective for public business entities for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. For all other entities, the guidance is effective for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early adoption is permitted, but no earlier than a reporting entity’s adoption date of ASC 606.
ASC 505-50-S99-1 addresses the balance sheet presentation of arrangements where a reporting entity issues unvested, forfeitable equity instruments to a non-employee as consideration for future services. In this scenario, the fair value of such equity instruments should not create equity until the future services are received (i.e., the instruments are not considered “issued” for accounting purposes until they vest). Consequently, there should be no accounting recognition for these instruments at the grant date, even if a measurement date has occurred (e.g., due to the existence of a performance commitment). The reporting entity should instead record costs and equity over the period the services are received.
See SC 1.5 for guidance on determining whether an individual is an employee or non-employee.

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