The Financial Accounting Standards Board (FASB) is expected to complete guidance on the Tax Cuts and Jobs Act (P.L. 115-97) by February 16. FASB previously proposed an Accounting Standards Update (ASU) to help entities reclassify certain stranded income tax effects in accumulated other comprehensive income resulting from the overhaul of the tax code.
Enactment of the Tax Cuts and Jobs Act generated questions about Generally Accepted Accounting Principles (GAAP) that require entities to adjust deferred tax liabilities and assets after a change in tax laws or rates. The proposed ASU aims to eliminate the stranded tax effects associated with the change in the federal corporate income tax rate, FASB explained.
Comment. The proposed ASU generally requires financial statement preparers to reclassify stranded tax effects within accumulated other comprehensive income to retained earnings in each period in which the effect of the change in the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017 (or portion thereof) is recorded. The amount of the reclassification would be the difference between the historical corporate income tax rate and the new 21-percent corporate income tax rate.
FASB tweaked its proposed ASU at its February 7 meeting. FASB clarified the reclassification amount, required entities with stranded tax effects to disclose their accounting policy for releasing those amounts, and provided for early adoption in certain cases, among other actions. FASB also directed its staff to prepare a final ASU no later than February 16.
FASB has posted questions and answers (Q&As) on its website about the Tax Cuts and Jobs Act. The Q&As discuss:
-Whether private companies and not-for-profits Can Apply SAB 118.
-Whether to discount the tax liability on the deemed repatriation.
-Whether to discount alternative minimum tax (AMT) credits that become refundable.
-Accounting for the base erosion anti-abuse tax.
-Accounting for global intangible low-taxed income.
By George L. Yaksick, Jr., Wolters Kluwer News Staff