Tax Accounting

Written for readers without an accounting background, this article provides a summary of the treatment of stock compensation under US GAAP. Also includes highlights of differences between the US GAAP and IFRS with respect to stock compensation.

There are numerous journal entries that are recorded in a company’s accounting records throughout the life of an equity compensation award to reflect the impact of that award on the company’s financials. This article illustrates the entries used to record some of the most common stock plan transactions.

This article explains how companies can elect to account for compensation that is not deductible under Section 162(m) and covers the processes needed to properly recognize DTAs for nondeductible stock awards.

In 2016, the FASB issued Accounting Standard Update (‘ASU’) 2016-09, Improvements to Employee Share-Based Payment Accounting, which makes a number of changes meant to simplify and improve accounting for share-based payments. One of the most significant changes relates to accounting for tax deductions associated with stock compensation, and will now result in all tax benefits being reflected in corporate earnings. This article examines what companies will need to consider in applying these changes.

On March 30, 2016, the FASB issued Accounting Standards Update 2016-09, which finalizes the FASB's updates to simplify the operation of ASC 718, including changes to the accounting treatment of the tax effects of stock compensation, forfeitures, and share withholding.

Deloitte's summary of and observations on ASU 2016-09, including an example of the journal entries for the new tax accounting.

The FASB proposed new Staff Positions on determining the grant date of a share-based payment and on a simplified transition method for computing the available excess tax benefits in additional paid-in capital at the time Statement 123R is adopted, 1 and the SEC’s economists reported their analysis of using market instruments to value employee stock options.2 This edition of Defining Issues summarizes the new guidance.

The SEC issues SAB 118 to provide guidance on reporting any adjustments to tax expense that are a result of the Tax Cuts and Jobs Act.

An Expensive Tax Cut

Run Your Own Numbers

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How will ASU 2016-09 change your equity accounting?

Did the "simplification initiative" ultimately simplify?