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ARTICLE · 25 MAY 2016

The FASB Simplifies Accounting for Share-Based Compensation

Brown Smith Wallace
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On March 30, the Financial Accounting Standards Board (FASB) published an updated standard to simplify some provisions in share-based compensation accounting.

United StatesAccounting and Audit
Daniel J. Ward, CPA
Daniel J. Ward, CPA
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On March 30, the Financial Accounting Standards Board (FASB) published an updated standard to simplify some provisions in share-based compensation accounting. The update — Accounting  Standards Update (ASU) No. 2016-09, Compensation — Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting — makes it easier for employers to report the tax deductions for paying employees with stock options and restricted shares. The update also provides practical expedients for private companies that offer share-based compensation.

Accounting for income taxes

Under the updated guidance, the most significant change relates to how companies will report the tax consequences of share-based compensation. Under current U.S. Generally Accepted Accounting Principles (GAAP), for each share-based payment, employers must determine whether the difference between the deduction for tax purposes and the compensation cost recognized for financial reporting purposes

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