Accounting treatment for sweat equity classifies noncash consideration as asset or expense and treats share value as compensation.

Where sweat equity shares are issued for non cash consideration, a depreciable or amortizable asset must be carried on the balance sheet per relevant accounting standards; if not so classifiable, the consideration must be expensed under the relevant accounting standards. The accounting value of sweat equity shares issued during an accounting period is to be treated in the financial statements as another form of compensation to the employee or director.

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