In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09—Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting, to address clarity, comparability and economics of stock-based compensation transactions. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities and classification on cash flow statements. The update is applicable to all companies that issue share-based payment awards to their employees, but some of the amendments apply only to nonpublic entities. The new accounting rules may significantly impact net income, earnings per share and cash flow statements.
Public business entities must apply the amendments for annual periods beginning after December 15, 2016, and interim periods within those annual periods. All other entities must apply the amendments for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. Companies are permitted to early adopt in any interim or annual period, provided they adopt all the amendments in the same period.