The FASB issued ASU 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting in March 2016 intended to simplify aspects of the accounting for and reporting of stock-based compensation as follows:
Nonpublic entities have two additional simplification provisions related to determining the expected term of certain share-based awards, and upon adoption of the new guidance, a one-time opportunity to change the measurement basis for all liability-classified awards to intrinsic value.
The guidance is effective in Q1 2017 for calendar year-end public business entities and in 2018 for calendar year-end nonpublic business entities.
Stock compensation is changing, effective for 2017. New FASB guidance could cause significant volatility in income tax expense from period to period. The tax effect of stock compensation will now all go directly to the income statement. Things are also moving on the cash flow statement. All tax related cash flows will now be included as operating activities. Watch PwC’s Nicole Berman describe these and other changes.
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