| US GAAP | IFRS |
| Transactions with non-employees | The US GAAP definition of employee focuses mainly on the common law definition of an employee. | IFRS has a more general definition of an employee that includes individuals who provide services similar to those rendered by employees. |
| | Either the fair value of (1) the goods or services received, or (2) the equity instruments is used to value the transaction, whichever is more reliable. | Fair value of the transaction should be based on the fair value of the goods or services received, and only on the fair value of the equity instruments if, in the rare circumstance, the fair value of the goods and services cannot be reliably estimated. |
| | If using the fair value of the equity instruments, ASC 505-50 Equity-Based Payments to Non-Employees (formerly EITF 96-18), requires measurement at the earlier of (1) the date at which a “commitment for performance” by the counterparty is reached, or (2) the date at which the counterparty’s performance is complete. | Measurement date is the date the entity obtains the goods or the counterparty renders the services. No performance commitment concept exists. |
| Measurement and recognition of expense — awards with graded vesting features | Entities make an accounting policy election to recognize compensation cost for awards containing only service conditions either on a straight-line basis or on an accelerated basis, regardless of whether the fair value of the award is measured based on the award as a whole or for each individual tranche. | Must recognize compensation cost on an accelerated basis — each individual tranche must be separately measured. |
| Equity repurchase features at employee’s election | Does not require liability classification if employee bears risks and rewards of equity ownership for at least six months from the date the equity is issued or vests. | Liability classification is required (no six-month consideration exists). |
| Deferred taxes | Calculated based on the cumulative GAAP expense recognized and trued up or down upon realization of the tax benefit. | Calculated based on the estimated tax deduction determined at each reporting date (for example, intrinsic value). |
| | If the tax benefit exceeds the deferred tax asset, the excess (“windfall benefit”) is credited directly to shareholder equity. A shortfall of the tax benefit below the deferred tax asset is charged to shareholder equity to the extent of prior windfall benefits, and to tax expense thereafter. | If the tax deduction exceeds cumulative compensation cost, deferred tax based on the excess is credited to shareholder equity. If the tax deduction is less than or equal to cumulative compensation cost, deferred taxes are recorded in income. |
| Modification of vesting terms that are improbable of achievement | If an award is modified such that the service or performance condition, which was previously improbable of achievement, is probable of achievement as a result of the modification, the compensation cost is based on the fair value of the modified award at the modification date. Grant date fair value of the original award is not recognized. | Probability of achieving vesting terms before and after modification is not considered. Compensation cost is the grant-date fair value of the award, together with any incremental fair value at the modification date. |
