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While there is no specific authoritative literature on wages and salaries paid to an employee during employment, a reporting entity should recognize these costs as services are provided. FASB Concepts Statement 5 sets out the principle that the consumption of an entity’s economic resources to support its ongoing operations should be recognized as an expense.
In addition, consistent with the guidance in ASC 718-10-15-4 (see SC 1.4), any share-based payments made to employees and service providers on an entity’s behalf, whether by a parent of the reporting entity or an economic-interest holder of the reporting entity, which includes any person or entity that has a financial interest in the reporting entity (via equity securities, debt, certain contractual arrangements or otherwise) should also be accounted for as compensation by the reporting entity, unless the payment is clearly for a purpose other than compensation for services to the entity. SAB Topic 5T expands this concept to payments other than share-based payments. While this guidance is technically only applicable to SEC registrants we believe the underlying concepts apply to all entities.

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