If you're searching for ASC 718 stock compensation accounting for startups, you're trying to solve a real problem, not collect definitions. This guide walks through it step by step, the way we'd explain it to a founder sitting across the table.
Quick Answer
ASC 718 stock compensation accounting for startups comes down to your specific numbers, not a generic rule of thumb — the fastest way to get a real answer is to model it against your actual cap table instead of a spreadsheet estimate.
- Start from your real numbers, not an industry average
- Revisit this every time you issue new equity or close a round
- Use a live cap table so the math updates automatically
What Is ASC 718 & Why Should You Care?
What Is ASC 718 & Why Should You Care?. Here's what that covers: accounting rule for stock-based compensation, your cfo will need this for audits, and how it plays out in practice. This is where audit actually shows up on your cap table.
Accounting rule for stock-based compensation
Accounting rule for stock-based compensation. This is the step most founders underestimate — worth getting right before it turns into a bigger cleanup job later.
Your CFO will need this for audits
Your CFO will need this for audits. It sounds minor until it isn't, usually right when an investor or new hire is looking at the numbers.
But it's YOUR equity—you should understand it
But it's YOUR equity—you should understand it. Get this wrong early and it compounds quietly until your next round forces the issue.
Affects how much "expense" is deducted from earnings
Affects how much "expense" is deducted from earnings. This is exactly the kind of detail that's easy to skip and expensive to fix retroactively.
The Three Core Components of ASC 718
The Three Core Components of ASC 718. Here's what that covers: measurement date, measurement date + measurement method, and how it plays out in practice.
Measurement Date
Measurement Date. When is the grant official?
Measurement Date + Measurement Method
Measurement Date + Measurement Method. How do you value it?
Service Condition
Service Condition. Does employee have to stay to vest?
How ASC 718 Affects Your Bottom Line
How ASC 718 Affects Your Bottom Line. Here's what that covers: stock option grant = monthly accounting expense, $1m in option grants = ~$250k annual accounting hit, and how it plays out in practice.
Stock option grant = monthly accounting expense
Stock option grant = monthly accounting expense. Most spreadsheet-based cap tables miss this until someone asks a question they can't answer on the spot.
$1M in option grants = ~$250K annual accounting hit
$1M in option grants = ~$250K annual accounting hit. This is the step most founders underestimate — worth getting right before it turns into a bigger cleanup job later.
Why investors care: Affects cash burn rate math
Why investors care: Affects cash burn rate math. It sounds minor until it isn't, usually right when an investor or new hire is looking at the numbers.
Why you should care: Affects tax filings
Why you should care: Affects tax filings. Get this wrong early and it compounds quietly until your next round forces the issue.
Lovie's ASC 718 Toolkit for Founders
Lovie's ASC 718 Toolkit for Founders. Here's what that covers: auto-calculate expense impact per grant, monthly accounting entries, and how it plays out in practice. This is where cap table actually shows up in practice.
Auto-calculate expense impact per grant
Auto-calculate expense impact per grant. It sounds minor until it isn't, usually right when an investor or new hire is looking at the numbers.
Monthly accounting entries
Monthly accounting entries. (ready for cfo).
Impact on cash burn visualizations
Impact on cash burn visualizations. This is exactly the kind of detail that's easy to skip and expensive to fix retroactively.
Integrated with your cap table history
Integrated with your cap table history. Most spreadsheet-based cap tables miss this until someone asks a question they can't answer on the spot.
Interactive: See Your ASC 718 Expense
Interactive: See Your ASC 718 Expense. Here's what that covers: input your employee grants, see monthly accounting expense, and how it plays out in practice.
Input your employee grants
Input your employee grants. This is exactly the kind of detail that's easy to skip and expensive to fix retroactively.
See monthly accounting expense
See monthly accounting expense. Most spreadsheet-based cap tables miss this until someone asks a question they can't answer on the spot.
Model future hires and their impact
Model future hires and their impact. This is the step most founders underestimate — worth getting right before it turns into a bigger cleanup job later.
Share with CFO/accountant
Share with CFO/accountant. — specifically, one-click export.
Competitor Comparison: Who Explains This?
Competitor Comparison: Who Explains This?. Here's what that covers: carta: mentions asc 718, assumes you know it, pulley: feature in "cfo guide," too technical, and how it plays out in practice.
Carta: Mentions ASC 718, assumes you know it
Carta: Mentions ASC 718, assumes you know it. This is the step most founders underestimate — worth getting right before it turns into a bigger cleanup job later. ASC 718 is table-stakes for late-stage compliance.
Pulley: Feature in "CFO guide," too technical
Pulley: Feature in "CFO guide," too technical. It sounds minor until it isn't, usually right when an investor or new hire is looking at the numbers. But most founders don't understand it until they hire a CFO.
Lovie: Bridges founder knowledge gap + provides automation
Lovie: Bridges founder knowledge gap + provides automation. Get this wrong early and it compounds quietly until your next round forces the issue. Lovie educates + automates.
None of this has to live in a spreadsheet you're afraid to open. For more on ASC 718 stock compensation accounting for startups, Lovie Cap Table is built to handle it alongside formation, funding, and equity tracking — not as three separate tools.