A PDF version of this publication is attached here: Stock-based compensation guide - November 2022 (PDF 4.8mb)
PwC is pleased to offer our updated Stock-based compensation guide. This guide explains the fundamental principles of accounting for all types of stock-based compensation, including which arrangements are subject to its scope, measurement date, vesting conditions, expense attribution, and classification (i.e., liability or equity), as well as the accounting required when awards are modified. This guide also discusses the unique accounting for nonpublic companies, awards to nonemployees, employee stock purchase plans and employee stock ownership plans, as well as valuation considerations. This guide also provides our perspectives on the impact of the accounting guidance on stock-based compensation plan design, including a summary of employer and employee income tax considerations.
This guide summarizes the applicable accounting literature, including relevant references to and excerpts from the FASB’s Accounting Standards Codification (the Codification). It also provides our insights and perspectives, interpretative and application guidance, illustrative examples, and discussion on emerging practice issues.
This guide should be used in combination with a thorough analysis of the relevant facts and circumstances, review of the authoritative accounting literature, and appropriate professional and technical advice. Guidance on financial statement presentation and disclosure related to stock-based compensation can be found in PwC’s Financial statement presentation guide (FSP 15).
References to US GAAP
Definitions, full paragraphs, and excerpts from the FASB’s Accounting Standards Codification are clearly labelled. In some instances, guidance was cited with minor editorial modification to flow in the context of the PwC Guide. The remaining text is PwC’s original content.
References to other PwC guidance
This guide provides general and specific references to chapters in other PwC guides to assist users in finding other relevant information. References to other guides are indicated by the applicable guide abbreviation followed by the specific section number. The other PwC guides referred to in this guide, including their abbreviations, are:
  • Business combinations and noncontrolling interests (BCG)
  • Derivatives and hedging (DH)
  • Fair value measurements (FV)
  • Financial statement presentation (FSP)
  • Financing transactions (FG)
  • Income taxes (TX)
  • Revenue from contracts with customers (RR)
Summary of significant changes
Following is a summary of the noteworthy revisions to the guide since it was last updated. Additional updates may be made to keep pace with significant developments.
Revisions made in November 2022
SC 10, Stock-based compensation plan design considerations
  • SC 10.2.4 was updated to reflect the SEC final rules regarding the recovery of erroneously awarded incentive compensation from executive officers in the event of an accounting restatement.
  • Content in SC was moved to SC, and existing content in SC to SC was reorganized.
  • SC 10.6.5 was added to illustrate the tax implications of employer loans issued in connection with share purchases.

Revisions made in January 2022
SC 2, Measurement date, vesting conditions, and expense attribution
  • SC 2.1 was updated for SAB 120 relating to the SEC staff’s views on accounting for share-based awards under ASC 718 that are granted shortly before a release of material non-public information that is expected to result in a material increase in share price.
SC 3, Liability-classified awards
  • Example SC 3-9 in SC was added to illustrate the accounting for a combination award with a guaranteed minimum value settled in shares.
SC 4, Modifications to stock-based compensation awards
  • Example SC 4-8 in SC 4.5.2 was added to illustrate the accounting for a modification of stock options pursuant to an antidilution provision using a “make-whole” cash payment.
SC 6, Nonpublic company stock-based compensation
  • SC 6.2 was updated for ASU 2021-07, pertaining to a practical expedient for nonpublic companies to determine the current price input of equity classified awards using a reasonable valuation method.

This publication has been prepared for general informational purposes, and does not constitute professional advice on facts and circumstances specific to any person or entity. You should not act upon the information contained in this publication without obtaining specific professional advice. No representation or warranty (express or implied) is given as to the accuracy or completeness of the information contained in this publication. The information contained in this publication was not intended or written to be used, and cannot be used, for purposes of avoiding penalties or sanctions imposed by any government or other regulatory body. PricewaterhouseCoopers LLP, its members, employees, and agents shall not be responsible for any loss sustained by any person or entity that relies on the information contained in this publication. Certain aspects of this publication may be superseded as new guidance or interpretations emerge. Financial statement preparers and other users of this publication are therefore cautioned to stay abreast of and carefully evaluate subsequent authoritative and interpretative guidance.
The FASB material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, Norwalk, CT 06856, and is reproduced with permission.

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