Business and Basis of Presentation (Policies)

9 Months Ended

Sep. 30, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of presentation. The accompanying interim condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”), as defined in the Financial Accounting Standards Board ("FASB") Accounting Standards Codification (“ASC”) Topic 270 for interim financial information and with the applicable instructions of the U.S. Securities & Exchange Commission (“SEC”) Rule 10-01 of Regulation S-X on Form 10-Q and should be read in conjunction with the consolidated financial statements and related notes of the Company filed in its Annual Report on Form 10-K for the year ended December 31, 2015. The fiscal year of Gartner is the twelve-month calendar period from January 1 through December 31. In the opinion of management, all normal recurring accruals and adjustments considered necessary for a fair presentation of financial position, results of operations and cash flows at the dates and for the periods presented herein have been included. The results of operations for the three and nine months ended September 30, 2016 may not be indicative of the results of operations for the remainder of 2016 or beyond.

Principles of consolidation

Principles of consolidation. The accompanying interim condensed consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated.

Use of estimates

Use of estimates. The preparation of the accompanying interim condensed consolidated financial statements requires management to make estimates and assumptions about future events. These estimates and the underlying assumptions affect the amounts of assets and liabilities reported, disclosures about contingent assets and liabilities, and reported amounts of revenues and expenses. Such estimates include the valuation of fees receivable, goodwill, intangible assets, and other long-lived assets, as well as tax accruals and other liabilities. In addition, estimates are used in revenue recognition, income tax expense, performance-based compensation charges, depreciation and amortization. Management believes its use of estimates in these interim condensed consolidated financial statements to be reasonable.

Management continuously evaluates and revises its estimates using historical experience and other factors, including the general economic environment and actions it may take in the future. Management adjusts these estimates when facts and circumstances dictate. However, these estimates may involve significant uncertainties and judgments and cannot be determined with precision. In addition, these estimates are based on management’s best judgment at a point in time. As a result, differences between our estimates and actual results could be material and would be reflected in the Company’s consolidated financial statements in future periods.

Adoption of new accounting standard

Adoption of new accounting standards. The Company has recently adopted the following accounting standard:

Stock-Based Compensation Accounting — The Company adopted FASB Accounting Standards Update (ASU) 2016-09, "Improvements to Employee Share-Based Payment Accounting" ("ASU No. 2016-09"), in the third quarter of 2016. While the required effective date for the adoption of this amendment for Gartner is January 1, 2017, the Company elected to early adopt ASU No. 2016-09, as permitted by the amendment. ASU No. 2016-09 requires changes in accounting for stock-based compensation, some of which must be applied to the beginning of the Company's current fiscal year, January 1, 2016.

Among the changes required by ASU No. 2016-09 is that excess tax benefits or deficiencies resulting from stock-based compensation awards must be recognized in income tax expense in the Company’s Condensed Consolidated Statements of Operations. Prior to ASU No. 2016-09, excess tax benefits or deficiencies were recorded in additional paid-in capital in Stockholders' (Deficit) Equity in the Condensed Consolidated Balance Sheet. ASU No. 2016-09 requires companies to apply this amendment from the beginning of the fiscal year in which it is adopted. Accordingly, this provision is effective for Gartner beginning January 1, 2016. As a result, our previously reported income tax expense, net income, earnings per share, and accumulated earnings for the six months ended June 30, 2016 have been adjusted, and the table below summarizes these changes. As disclosed in the table, the adoption of ASU No. 2016-09 increased both our basic and diluted earnings per share for the six months ended June 30, 2016 by $0.10 per share. For the three and nine months ended September 30, 2016, the adoption of ASU No. 2016-09 increased both basic and diluted earnings per share by $0.01 and $0.11 per share, respectively.

ASU No. 2016-09 also requires excess tax benefits related to stock-based compensation awards to be reported as cash flows from operating activities along with all other income tax cash flows on the Condensed Consolidated Statement of Cash Flows. Previously these excess tax benefits were reported as cash flows from financing activities on the Condensed Consolidated Statement of Cash Flows. ASU No. 2016-09 allows companies to elect either a prospective or retrospective application for the cash flow classification change, for which the Company has elected to apply this classification amendment prospectively, effective January 1, 2016. As a result, approximately $8.5 million in excess tax benefits previously reported as cash flows from financing activities on the Condensed Consolidated Statement of Cash Flows for the six months ended June 30, 2016 have been reclassified as cash flows from operating activities. The table below summarizes these retroactive changes. The Company also recorded an additional $0.5 million of excess tax benefits in the three months ended September 30, 2016 for stock-based compensation awards, resulting in a total excess tax benefit for the nine months ended September 30, 2016 of approximately $9.0 million.

ASU No. 2016-09 also permits companies to make an entity-wide accounting policy election to recognize forfeitures of share-based awards as they occur or make an estimate by applying a forfeiture rate each quarter. The Company previously estimated forfeitures but has optionally selected to change its accounting policy and account for forfeitures as they occur. ASU No. 2016-09 requires this change in accounting policy to be applied using a cumulative-effect adjustment to accumulated earnings as of the beginning of the period in which the rule is adopted. Accordingly, the Company has adjusted its opening accumulated earnings effective January 1, 2016 and as a result the previously reported accumulated earnings balances as of March 31, 2016 and June 30, 2016 have been impacted. The table below summarizes these retroactive changes.

The following table summarizes the retroactive impact of the adoption of ASU 2016-09 for the periods indicated (in thousands, except earnings per share data):



	Three Months Ended				Three Months Ended				Six Months Ended
	March 31, 2016				June 30, 2016				June 30, 2016
	As Originally Reported		Adjusted		As Originally Reported		Adjusted		As Originally Reported		Adjusted
Provision for income taxes	$	20,140	$	15,320	$	29,280	$	25,565	$	49,420	$	40,884
Net income	40,167		44,987		47,911		51,626		88,078		96,614
Basic earnings per share	0.49		0.55		0.58		0.63		1.07		1.17
Diluted earnings per share (1)	0.48		0.54		0.57		0.62		1.05		1.15
Operating cash flow	8,580		13,331		144,734		148,452		153,314		161,783
Accumulated earnings	$	1,490,851	$	1,495,411	$	1,538,762	$	1,547,037	$	1,538,762	$	1,547,037

(1) ASU No. 2016-09 requires certain changes in the calculation of diluted shares. The impact of applying these changes was not significant.

Accounting standards issued but not yet adopted. The FASB has issued several accounting standards that have not yet become effective and that may impact the Company’s consolidated financial statements or related disclosures in future periods. These standards and their potential impact are discussed below:

Statement of Cash Flows — In August 2016, the FASB issued ASU No. 2016-15, "Classification of Certain Cash Receipts and Cash Payments" ("ASU No. 2016-15"). ASU No. 2016-15 sets forth classification requirements for certain cash flow transactions. ASU No. 2016-15 is effective for Gartner on January 1, 2018, with early adoption permitted. We have evaluated the impact of ASU No. 2016-15 and we do not expect that it will have a material impact on Gartner's consolidated financial statements.

Financial Instrument Credit Losses — In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments—Credit Losses" ("ASU No. 2016-13"). ASU No. 2016-13 amends the current financial instrument impairment model by requiring entities to use a forward-looking approach based on expected losses to estimate credit losses on certain types of financial instruments, including trade receivables. ASU No. 2016-13 is effective for Gartner on January 1, 2020, with early adoption permitted. We are currently evaluating the potential impact of ASU No. 2016-13 on the Company's consolidated financial statements.

Leases — In February 2016, the FASB issued ASU No. 2016-02, "Leases" ("ASU No. 2016-02") which will require significant changes in the accounting and disclosure of lease arrangements. Among the significant changes required by ASU No. 2016-02 is that almost all lease obligations will be recorded on the balance sheet as a liability, along with a corresponding right of use asset. Currently under U.S. GAAP, lease arrangements that meet certain criteria are considered operating leases and are not recorded on the balance sheet. ASU No. 2016-02 also requires expanded disclosures about leasing arrangements. ASU No. 2016-02 will be effective for Gartner on January 1, 2019. We are currently evaluating the impact of ASU No. 2016-02 on the Company's consolidated financial statements.

Financial Instruments Recognition and Measurement — In January 2016, the FASB issued ASU No. 2016-01, "Financial Instruments Overall - Recognition and Measurement of Financial Assets and Liabilities" ("ASU No. 2016-01") to address certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. Among the significant changes required by ASU No. 2016-01 is that equity investments will be measured at fair value with changes in fair value recognized in net income. ASU No. 2016-01 will be effective for Gartner on January 1, 2018. We have evaluated the impact of ASU No. 2016-1 and we do not expect that it will have a material impact on Gartner's consolidated financial statements but may require additional disclosure.

Revenue — In May 2014, the FASB issued ASU No. 2014-09, "Revenue from Contracts with Customers" ("ASU No. 2014-09"). ASU No. 2014-09 and related amendments require changes in revenue recognition policies as well as require enhanced disclosures. ASU No. 2014-09 is intended to clarify the principles for recognizing revenue by removing inconsistencies and weaknesses in existing revenue recognition rules; provide a more robust framework for addressing revenue recognition issues; improve comparability of revenue recognition practices across entities, industries, jurisdictions and capital markets; and provide more useful information to users of financial statements through improved revenue disclosures. ASU No. 2014-09 will be effective for Gartner on January 1, 2018, and the Company expects to complete its assessment of the estimated impact of ASU No. 2014-09 on its consolidated financial statements by the end of 2016.

The FASB also continues to work on a number of other significant accounting standards which if issued could materially impact the Company's accounting policies and disclosures in future periods. However, since these standards have not yet been issued, the effective dates and potential impact are unknown.

Acquisitions

Acquisitions. The Company accounts for business acquisitions in accordance with the acquisition method of accounting as prescribed by FASB ASC Topic 805, Business Combinations. The acquisition method of accounting requires the Company to record the net assets and liabilities acquired based on their estimated fair values as of the acquisition date, with any excess of the consideration transferred over the estimated fair value of the net assets acquired, including identifiable intangible assets, to be recorded to goodwill. Under the acquisition method, the operating results of acquired companies are included in the Company's consolidated financial statements beginning on the date of acquisition.