NOTE 3. STOCK-BASED COMPENSATION

On January 1, 2017, the Company adopted a new accounting standard update (“ASU”) No. 2016-09, which simplifies several aspects of the accounting for employee share-based payment transactions, including the accounting for income taxes, forfeitures, and statutory tax withholding requirements, as well as classification in the statement of cash flows. Subsequent to the adoption, the Company records any excess tax benefits or deficiencies from its equity awards in its Consolidated Statements of Income in the reporting periods in which vesting occurs. As a result, the Company’s income tax expense and associated effective tax rate are impacted by fluctuations in stock price between the grant dates and vesting dates of equity awards. This guidance of requiring recognition of excess tax benefits and deficits in the income statement was applied prospectively with the adoption of ASU No. 2016-09.

For the three months ended March 31, 2018 and 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $145 thousand and $64 thousand, respectively, resulting in an increase of basic and diluted earnings per share by less than $0.01.

The Company has elected to keep the accounting policy of estimated forfeitures, rather than account for forfeitures as they occur. The amendments in the guidance that require application using a modified retrospective transition method did not impact the Company. Therefore, there was no cumulative-effect adjustment to retained earnings recognized as of January 1, 2017.

ASU No. 2016-09 also changes the classification and presentation of the excess tax benefit from stock-based compensation in the statement of cash flows. The Company applied the amendments in this guidance relating to classification on its consolidated statement of cash flows prospectively.

Reported stock-based compensation expense was classified as follows (in thousands):


	Three months ended
	March 31,
	2018		2017
Casino	$	38	$	32
Food and beverage		38		34
Hotel		10		8
Selling, general and administrative		480		391
Total stock-based compensation, before taxes		566		465
Tax benefit		(119)		(163)
Total stock-based compensation, net of tax	$	447	$	302

Effective January 1, 2018, the Company adopted ASU 2017-09, which provides guidance about when changes to the terms or conditions of a share-based payment award must be accounted for as modifications and the disclosure required.

During the first three months of 2018, there were no changes to the terms and conditions of the share-based awards that required modification accounting or disclosure.