FASB Issues Accounting Standards Update on Employee Share-Based Payment Accounting Improvements

The Financial Accounting Standards Board (FASB) on March 30, 2016 issued Accounting Standards Update (ASU) 2016-09, which finalizes amendments intended to improve and simplify accounting for stock compensation under FASB Accounting Standards Codification (ASC) Topic 718 (topic 718). The issuance of ASU 2016-09 concludes this narrow-scope fast-track project.

For public companies, ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2016, and interim periods within those annual periods (that is, 2017 financial statements for calendar year companies). For nonpublic companies, ASU 2016-09 is effective for annual reporting periods beginning after December 15, 2017 (that is, 2018 financial statements for calendar year companies), and interim periods within annual periods beginning after December 15, 2018 (that is, 2019 quarterly statements for calendar year companies).

Importantly, early adoption of ASU 2016-09 is permitted in any interim or annual period for which financial statements have not been issued, but companies must adopt all of the guidance in the same period. For example, if a company wishes to early adopt to take advantage of the more favorable stock-for-tax withholding provisions, it must also early adopt all other provisions of the ASU including the potentially volatile income tax provisions discussed in our report.