The timing of recognizing share-based payment transactions in the context of journal entries is not directly tied to the physical receipt, ordering, or usage of goods. Instead, according to ASC 718-10, Share-Based Payment, the recognition of share-based payment transactions, such as stock options or restricted stock units, typically occurs when the associated vesting period begins. The cost is amortized over the vesting period, with a corresponding increase in additional paid-in capital. Thus, the statement "Services are recognized as they are received" aligns more closely with the principles of share-based payment accounting, where the cost of the award is recognized as the associated services are rendered over time, not as goods are received, ordered, or used.
Understanding Share-Based Payment Accounting: When and How to Recognize Compensation Costs in Journal Entries
When creating journal entries to recognize share-based payment transactions, the timing of recognition is determined by the timing of the receipt of the goods and services. Which of the below statements about timing is true?
Services are recognized as they are received
Goods are recognized when they are ordered
Goods are recognized when they are used
