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 September 30, 2018 and 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $115 thousand and $122 thousand, respectively, resulting in an increase of basic and diluted earnings per share by less than $0.01, for each of the periods. For the nine months ended September 30, 2018 and 2017, the effect of the adoption of ASU No. 2016-09 was a decrease of tax expense by $744 thousand and $463 thousand, respectively, resulting in an increase of basic and diluted earnings per share by approximately $0.04 and $0.03, respectively.

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				Nine months ended
	September 30,				September 30,
	2018		2017		2018		2017
Casino	$	17	$	32	$	98	$	100
Food and beverage		15		27		89		90
Hotel		17		8		38		24
Selling, general and administrative		853		502		2,068		1,313
Total stock-based compensation, before taxes		902		569		2,293		1,527
Tax benefit		(189)		(199)		(481)		(534)
Total stock-based compensation, net of tax	$	713	$	370	$	1,812	$	993

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