What is ASC-505-50?
What is ASC 505-50?
ASC 505-50 rules require all nonpublic firms to account for non-employee equity transactions based on either the fair value of the services received or the fair value of the equity instrument issued.
ASC 505-50 determines the measurement date as the earlier of:
- The date that commitment to perform has been determined.
- The actual date that the performance has been completed.
A commitment to perform starts when a large enough disincentive is presented for not performing the service. The disincentive must be directly linked to the equity provider (company) and the counterparty performing the services.
What constitutes a disincentive for nonperformance?
- Suing the other party does not necessarily result in significant damages.
- Damages may or may not be viewed as significant to the counterparty.