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 potentially game-changing implications 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.

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