Investor Presentaiton
FORM 10-K
In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee
Share-Based Payment Accounting. This standard provides for several changes to the accounting for stock compensation, including
a requirement that certain income-tax effects of awards be recognized in Net income in the period in which the awards are settled
or vested, rather than recognized as Paid-in capital in the equity section of the balance sheet. The standard also changes the
presentation of excess tax benefits and statutory tax withholdings in the statement of cash flows. This standard is effective for
interim and annual periods beginning January 1, 2017; however, early adoption is permitted. We elected to adopt this standard in
the fourth quarter of 2016, which requires us to reflect any adjustments as of January 1, 2016, the beginning of the annual period
that includes the adoption. Each of the provisions within this standard has its own specified transition method; some have been
applied prospectively and others have been applied on a retrospective basis.
The primary effects of early adoption on our financial statements are as follows:
•
.
Income statement effects: Prospective basis - Net excess tax benefits and deficiencies will now be included in Provision for
income taxes, rather than in Paid-in capital. The new standard requires this to be adopted on a prospective basis, with an
initial adjustment to interim periods in the year of adoption. We recorded adjustments within Provision for income taxes,
rather than in Paid-in capital, for excess tax benefits of $43 million, $40 million and $50 million for the first, second and
third quarters of 2016, respectively. Excess tax benefits for the fourth quarter of 2016 were $17 million, for a total of
$150 million recognized for all of 2016. See Note 6 for more information on income taxes. This standard also affects the
average shares outstanding used in the diluted EPS calculation. The effects of these adjustments are shown in the table
below. Results for prior annual periods were not affected.
Cash flow effects: Retrospective basis - Excess tax benefits are now included in Cash flows from operating activities rather
than Cash flows from financing activities in our Consolidated Statements of Cash Flows. We elected to apply this change in
presentation retrospectively, and thus, prior periods have been adjusted. Taxes paid for employee shares withheld upon the
vesting of RSUs are now included in Cash flows from financing activities in our Consolidated Statements of Cash Flows.
This change is required to be applied retrospectively, and thus, prior periods have been adjusted.
Under this standard, entities are permitted to make an accounting policy election to either estimate forfeitures on stock
compensation awards, as previously required, or to recognize forfeitures as they occur. We elected not to change our policy on
accounting for forfeitures and will continue to estimate forfeitures expected to occur in determining the amount of compensation
cost to be recognized in each period.
The effects of our adoption of the new standard on our unaudited quarterly results for 2016 are as follows:
1st
Quarter
2nd
3rd
Reported
Recast
Reported
Recast
Reported
Recast
Income statement data:
Provision for income taxes
$ 282
$ 239
Net income
668
711
$ 323
779
$ 283
819
$ 413
$ 363
968
1,018
Average diluted shares outstanding, in millions
Basic EPS
1,018
1,022
1,016
1,020
1,017
1,023
$ 0.65 $ 0.70 $ 0.77
$ 0.65 $ 0.69
$ 0.81
$ 0.95
$ 1.00
$ 0.76
$ 0.79
$ 0.94
$ 0.98
Diluted EPS
Cash flow data:
Cash flows from operating activities
Cash flows from financing activities
$ 547
(839)
$ 653
(945)
$ 1,069
(1,180)
$ 1,109
(1,220)
$1,413
(676)
$ 1,465
(728)
Certain annual cash flow information has also been adjusted to reflect select aspects of the new standard that are applied
retrospectively. The impact to our previously reported annual results is as follows:
Cash flows from operating activities
Cash flows from financing activities
36
For Years Ended December 31,
2015
2014
Reported
Recast
$ 4,268
(4,165)
$ 4,397
(4,294)
Reported
$ 3,892
(3,943)
Recast
$ 4,054
(4,105)
TEXAS INSTRUMENTS . 2016 FORM 10-KView entire presentation