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FASB Discusses Accounting Issues Arising from Tax Reform

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On January 10, 2018, the Financial Accounting Standards Board (FASB) met in order to discuss various accounting issues arising from the Tax Cuts and Jobs Act (the “Tax Act”) enacted on December 22, 2017. We have included below a summary of the topics discussed and tentative decisions reached during this meeting.

At a Glance

At its January 10, 2018 Board meeting, the Board directed the FASB staff to prepare a proposed Accounting Standards Update for exposure that would require a one-time reclassification from accumulated other comprehensive income to retained earnings for the “stranded tax effects” of the newly enacted corporate tax rates related to deferred tax assets or liabilities originally recorded in other comprehensive income.

In addition, the Board discussed the following topics, and while no decisions were made, the Board was supportive of the staff’s preliminary views on these topics:

  • To not object to private companies and not-for-profit entities applying the guidance in SEC Staff Accounting Bulletin No. 118 regarding reporting the effects of the Tax Act when determination of the impact of all of the provisions has not been completed.
  • The tax liability related to the deemed repatriation of undistributed and untaxed foreign earnings and profits should not be discounted to reflect the time value of money.
  • Alternative minimum tax (AMT) tax credits that will be used or ultimately refunded should not be discounted to reflect the time value of money.
  • Deferred tax assets and liabilities that may reverse and be taxed under the base erosion anti-abuse tax (BEAT) regime should be measured and recognized under the regular tax regime, not based on the lower tax rates of BEAT.
  • Under the global intangible low-taxed income (GILTI) provisions of the Tax Act, entities will have an accounting policy election with respect to treatment of basis differences that may be taxed as GILTI in the future as to whether they should be recognized currently or included in the period incurred.

None of the above conclusions have been finalized. The reclassification of the stranded tax effects in accumulated other comprehensive income will go through an accelerated, but complete, standard setting process of exposure, comment, re-deliberation, and if approved, adoption. The other matters are expected to be addressed as staff technical questions and answers, considered at the January 18 meeting of the Emerging Issues Task Force, and ultimately posted to the “Implementing New Standards” information section of the FASB’s website.

Continue reading for additional background and information on the discussions of the January 10 Board meeting.