CHALLENGE
FAS 123R applies to public and private companies and has a significant impact on accounting for income taxes. FAS 123R requires that financial statements recognize the fair market value of employee stock-based awards as compensation expense. The stock compensation expense recorded for financial statement purposes is generally different in timing and amount from that recognized as an income tax deduction. Therefore, the difference in amount creates either a “windfall” (tax deduction exceeding book deduction) or a “shortfall” (book stock compensation deduction in excess of tax). The tax effects of a “shortfall” should be recorded as additional income tax expense, unless the company has an excess APIC Pool to offset. Companies must determine their excess APIC pool to properly assess the potential tax effects of a shortfall.

SOLUTION
True Partners brings extensive knowledge and experience to bear on the tax effects of equity based compensation. We partner with you to ensure you achieve maximum results by addressing significant FAS 123R APIC Pool-related issues, such as:

•  Best method determination: Long method of paragraph 81 of FAS 123R versus Short-cut method of FSP 123(R)-3 (which must be elected within 12 months of FAS 123R effective date)

•  Information gathering, including:

-  Grant-by-grant tax stock compensation deduction information for all stock compensation plans by separate legal entity, and by year, and the related FAS 123 proforma stock compensation

-  APIC entries and the APB 25 financial accounting stock compensation charge reflected in the APIC entries for each stock compensation plan

-  FAS 123 proforma stock compensation charge related to partially vested options, “qualified dispositions,” and stock grants made to foreign legal entities for which a tax deduction is not permitted by local country laws

- A schedule of net operating losses to determine the impact net operating losses (NOLs) may have on the APIC Pool

•  Business combinations and equity restructurings

•  Issues facing multi-national companies (e.g., cost sharing)

THE TRUE PARTNERS TEAM

Louis Gomes , CPA Managing Director
408 625 5099 | This e-mail address is being protected from spam bots, you need JavaScript enabled to view it

Timothy D. Nolan, CPA, Senior Manager
202 253 0352 | This e-mail address is being protected from spam bots, you need JavaScript enabled to view it