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FASB Permits Non-Public Entities to Utilize SEC Accounting and Reporting Guidance for US Tax Reform

By: Michael L. Dembek |

On January 10, 2018, FASB held a board meeting in which they permitted the utilization of Staff Accounting Bulletin No. 118 (SAB 118) issued by the SEC on December 22, 2017. SAB 118 allows for both public and now non-public companies who may or may not have the necessary information available, prepared, or analyzed (including computations) to include in reasonable detail the Accounting for Income Taxes (ASC 740) impact of US Tax Reform within their applicable annual/quarterly financial statements of enactment. Have you considered the US Tax Reform implications on your income tax provision for calendar year-end 2017 as of today? If your company would like to discuss the tax accounting changes driven by tax reform, your True Partners team is here to help.

Our True Alert is intended to bring to light some considerations regarding US Tax Reform for both public and non-public companies, that your organization should be thinking about now.

US Tax Reform – ASC 740 Summary

With Tax Reform officially becoming law on December 22, 2017, all taxpayers should be analyzing today the ASC 740 impact to their upcoming 2017 annual/quarterly financial statements.

Per ASC 740, tax effects of changes in tax law or rates should be recognized in the period in which the legislation is enacted. Therefore, the implications of changes in tax law or rates should be accounted for within the 2017 annual financial statements if a calendar year taxpayer or quarterly financial statements if a fiscal year taxpayer. For additional details regarding the ASC 740 impact of Tax Reform refer to True Alert 2017-12.

US Tax Reform – SAB No. 118 Summary

SAB No. 118 issued on December 22, 2017, provides guidance for the following scenarios and overall the SEC expects entities will act in good faith to incorporate the ASC 740 impact of US Tax Reform.

  • Measurement of the ASC 740 impact of US Tax Reform is complete or portions are complete must be reflected within the financial statements of enactment.
  • Measurement of the ASC 740 impact of US Tax Reform that can be reasonably estimated must be reflected as provisional amounts within the financial statements of enactment. Provisional amounts within the financial statements of enactment may be adjusted during the measurement period (ASC 805-10-25-13) when the proper amounts are determined.
  • Measurement of the ASC 740 impact of US Tax Reform that cannot be reasonably estimated are not required to be reflected within the financial statements of enactment. If impacts of US Tax Reform cannot be reasonably estimated, ASC 740 tax law effects immediately prior to the date of enactment should be incorporated. Once provisional amounts are determined, they must be reflected within the first reporting period in which a reasonable estimate is determined.

If the ASC 740 impact is not complete, additional disclosures should be provided within the financial statements that incorporate US Tax Reform.

If your company would like to discuss the tax accounting changes driven by tax reform, please reach out to one of our team members.