ASU 2016-09 in its Seventh Inning Stretch
By now, most companies have adopted ASU 2016-09, the revision to ASC 718 that (among other things) eliminates the APIC pool, provides optionality on whether to use a forfeiture rate, and relaxes the liability classification trigger for withholding taxes.
We’ve written extensively about the revisions, lately focusing on how eliminating the APIC pool is a mixed bag. Since eliminating the APIC pool requires companies to recognize windfalls and benefits in their income statement, the often-magnanimous results of this are beginning to be noticed. Case in point: Bloomberg BNA quoted our CEO, Takis Makridis, in a story about Goldman Sachs’ $475 million tax benefit in Q1 owing to ASU 2016-09.
The story of ASU 2016-09 is far from over. What goes up must come down, and its impact will not be fully appreciated until equity prices enter a bear market. The best response to this potential P&L volatility is forecasting future tax settlements to avoid surprises internally and externally.
Read the Bloomberg BNA article here.