Under ASC 718, how is the requisite service period determined when an award has both a service condition and a performance condition?
- The requisite service period is the longer of the explicit service period and the period over which the performance condition is expected to be achieved. (correct answer)
- The requisite service period is always equal to the performance period.
- The requisite service period is the shorter of the service period and the performance period.
- There is no requisite service period when a performance condition exists.
Explanation: Under ASC 718, when an award has both explicit service and performance conditions, the requisite service period is the longer of the explicit service period and the period over which the performance condition is expected to be achieved. This ensures compensation is recognized over the full period during which the employee must provide service to earn the award. Answer A is correct. Answer B equates the service period to the performance period only. Answer C uses the shorter period, which would accelerate expense recognition inappropriately. Answer D is incorrect; performance conditions do not eliminate the concept of a requisite service period.