The FASB issued two accounting standards updates in 2016 and 2017, amending the accounting for stock compensation / share-based payments.
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 was effective in Q1 2017 for calendar year-end public business entities and is effective in 2018 for calendar year-end nonpublic business entities.
Separately, the FASB issued new guidance ASU 2017-09, Compensation—Stock Compensation (Topic 718): Scope of Modification Accounting, in May, 2017, to clarify when to account for a change to the terms or conditions of a share-based payment award as a modification.
The accounting for stock compensation is changing effective in 2017 for calendar year-end public business entities and in 2018 for calendar year-end nonpublic business entities. 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.