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This chapter addresses the accounting treatment for employee stock purchase plans (ESPPs) under ASC 718, Compensation—Stock Compensation. The impact of shares issued through ESPPs on EPS is discussed in FSP 7.4.3.8 and FSP 7.5.5.5. ESPPs generally do not result in a tax benefit to the employer unless there is a disqualifying disposition. See TX 17.4.1 for guidance addressing the tax accounting consequences of disqualifying dispositions.
A typical ESPP in the United States is designed to promote broad-based employee ownership of a company's stock. By using payroll withholding and avoiding brokers' commissions, ESPPs give employees a convenient and economical means of acquiring company shares (usually at a discount). ESPPs provide favorable tax treatment if the plan meets the tax-qualification conditions of Internal Revenue Code Section 423.
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