For each award, an entity must determine whether the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes results in either:

All excess tax benefits and tax deficiencies would be recognized as income tax expense or benefit in the income statement. In addition, an entity would recognize excess tax benefits regardless of whether the benefit reduces taxes payable in the current period.

Excess cash benefits must be:

Excess tax benefits would not be separated from other income tax cash flows. Therefore, they would be classified along with other cash flows as an operating activity.

Accruals of compensation cost are based on the number of awards that are expected to vest.

An entity would make an accounting policy election to either:

Among other things, one requirement for an award to qualify for equity classification is that an entity cannot partially settle the award in cash in excess of the employer's minimum statutory withholding requirements.

The threshold to qualify for equity classification would permit withholding up to the employee's maximum individual statutory tax rate in the applicable jurisdictions.

There is currently no guidance on classification of cash paid by an employer to the taxing authorities when directly withholding shares for tax-withholding purposes.

Cash paid by an employer when directly withholding shares for tax-withholding purposes would be classified as a financing activity, consistent with the repurchase of an entity's equity.

The guidance for assessing repurchase features (put and call rights) that are contingent on an event within the employee's control differs from the guidance for assessing contingent events outside the employee's control.

An entity would assess whether the contingent event that allows for exercise of the repurchase feature is probable of occurring, regardless of whether the contingent event is within or outside the employee's control.

Entities must estimate the period of time that an option will be outstanding.

A non-public entity could elect a practical expedient to estimate the expected term for all awards with performance or services conditions.

When Topic 718 was first adopted, non-public entities had the option to measure all liability-classified awards at intrinsic value. However, some non-public entities were not aware of that option.

A non-public entity would be permitted to make a one-time election to switch from measuring all liability-classified awards at fair value to intrinsic value.