01—Abstract
Summary
Summary of the 8-K filed September 1, 2016. Cited figures are marked; the original filing is the authoritative source.
Salesforce, Inc. filed this Form 8-K on September 1, 2016, to report on the retrospective adoption of new accounting pronouncements during the first quarter of fiscal year 2017.
These changes primarily affect the presentation of debt issuance costs and the accounting for employee share-based payments. Specifically, debt issuance costs are now presented as a direct deduction from the corresponding debt liability, rather than as an asset, in line with ASU 2015-03, with an exception for line-of-credit arrangements under ASU 2015-15. The company also adopted ASU 2016-09, which alters the accounting for employee stock compensation by requiring excess tax benefits and deficiencies to be recognized in the income statement when awards vest or settle, and removes the reclassification of related cash flows from operating to financing activities.
Importantly, Salesforce states that these accounting changes had no material impact on its historical consolidated financial condition or statements of operations. This filing serves to update the consolidated financial statements previously presented in its Form 10-K for the fiscal year ended January 31, 2016.
02—Key points
Key Highlights
- Salesforce is retrospectively adopting new accounting pronouncements for presentation in its financial statements.
- Changes include the presentation of debt issuance costs, now deducted from liabilities per ASU 2015-03/2015-15.
- Accounting for employee share-based payments is updated under ASU 2016-09.
- The adoption of these standards impacts the Consolidated Balance Sheets and Statements of Cash Flow.
- Crucially, the company asserts that these accounting changes had no material effect on its historical consolidated financial condition.
- The filing updates the Form 10-K for the fiscal year ended January 31, 2016, with revised financial statements.
- The company explicitly states that these are not restatements but rather revisions due to accounting standard adoption.
03—Questions
Frequently Asked Questions
What is the main purpose of this 8-K filing?
The main purpose of this 8-K filing is to report Salesforce's retrospective adoption of new accounting pronouncements, which required revisions to its previously issued consolidated financial statements for the fiscal year ended January 31, 2016. These revisions primarily affect the presentation of debt issuance costs and employee share-based payments.
Did these accounting changes affect Salesforce's reported profits or revenues?
No, Salesforce explicitly states that the adoption of these new accounting pronouncements had no material impact on the Company's Consolidated Statements of Operations, Consolidated Statements of Comprehensive Loss, or Consolidated Statements of Stockholders' Equity. The revisions only affect the Consolidated Balance Sheets and Consolidated Statements of Cash Flow.
How does the presentation of debt issuance costs change?
Previously, debt issuance costs were likely presented as an asset. With the adoption of ASU 2015-03, these costs are now presented as a direct deduction from the corresponding debt liability on the balance sheet. ASU 2015-15 provides an exception for line-of-credit arrangements.
What is the impact of ASU 2016-09 on Salesforce's financial reporting?
ASU 2016-09 simplifies employee share-based payment accounting. For Salesforce, this means excess tax benefits or deficiencies from stock awards will be recorded in the income statement when awards vest or settle, and related cash flows will no longer be reclassified from operating to financing activities.
04—Continue