We are pleased to release MaloneBailey's May 2018 issue of The Crunch, our newsletter highlighting recent accounting, regulatory and tax updates. Please note that the updates provided in this newsletter are not a comprehensive list.
We encourage you to visit the SEC, FASB and IRS websites for more information as well as a complete list of updated rules, regulations and proposals.
We invite you to contact us should you have any questions about the information provided in this issue.
We invite you to visit our website to review archived versions of this newsletter containing past accounting, regulatory and tax updates.
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What's the Crunch?
Featured Podcast
Accounting and Regulatory Updates
Recent FASB Updates & Proposals
Recent SEC Updates & Proposals
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Summary -
The FASB has issued Accounting Standards Update (ASU) No. 2018-05, Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. ASU 2018-05 amends certain SEC material in Topic 740 for the income tax accounting implications of the recently issued Tax Cuts and Jobs Act (Act).
ASU 2018-05 adds the following guidance, among other things, to the FASB Accounting Standards Codification™ regarding the Act:
Question 1:
If the accounting for certain income tax effects of the Act is not completed by the time a company issues its financial statements that include the reporting period in which the Act was enacted, what amounts should a company include in its financial statements for those income tax effects for which the accounting under Topic 740 is incomplete?
Answer 1:
In a company's financial statements that include the reporting period in which the Act was enacted, a company must first reflect the income tax effects of the Act in which the accounting under Topic 740 is complete. These completed amounts would not be provisional amounts. The company would then also report provisional amounts for those specific income tax effects of the Act for which the accounting under Topic 740 will be incomplete but a reasonable estimate can be determined. For any specific income tax effects of the Act for which a reasonable estimate cannot be determined, the company would not report provisional amounts and would continue to apply Topic 740 based on the provisions of the tax laws that were in effect immediately prior to the Act being enacted. For those income tax effects for which a company was not able to determine a reasonable estimate (such that no related provisional amount was reported for the reporting period in which the Act was enacted), the company would report provisional amounts in the first reporting period in which a reasonable estimate can be determined.
Question 2:
If an entity accounts for certain income tax effects of the Act under a measurement period approach, what disclosures should be provided?
Answer 2:
The staff believes an entity should include financial statement disclosures to provide information about the material financial reporting impacts of the Act for which the accounting under Topic 740 is incomplete, including:
- Qualitative disclosures of the income tax effects of the Act for which the accounting is incomplete;
- Disclosures of items reported as provisional amounts;
- Disclosures of existing current or deferred tax amounts for which the income tax effects of the Act have not been completed;
- The reason why the initial accounting is incomplete;
- The additional information that is needed to be obtained, prepared, or analyzed in order to complete the accounting requirements under Topic 740;
- The nature and amount of any measurement period adjustments recognized during the reporting period;
- The effect of measurement period adjustments on the effective tax rate; and
- When the accounting for the income tax effects of the Act has been completed.
ASU 2018-05 is effective upon inclusion in the FASB Codification.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary
- As reported in its "Summary of Board Decisions" publication, the FASB met on April 11, 2018, and redeliberated amendments in the proposed ASU, Codification Improvements. The FASB affirmed its decision to supersede guidance related to Circular 202 and affirmed that the amendments will be effective upon issuance of a final Accounting Standards Update.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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FASB Discusses Agenda Prioritization Research Results
Summary
- As reported in its "Summary of Board Decisions" publication, the FASB met on March 28, 2018, and discussed the results of its staff's research on the following five potential projects:
- Determining a Highly Inflationary Economy;
- Interest Rate Lock Commitments;
- Misalignment of Collections Definition;
- Cost Capitalization for Episodic Television Series; and
- Recognition under Topic 805 for an Assumed Liability in a Revenue Contract.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary
- The staff in the SEC's Division of Corporation Finance has updated its Compliance and Disclosure Interpretation (C&DI), Non-GAAP Financial Measures. This C&DI provides staff interpretations of the rules and regulations on the use of non-GAAP financial measures.
The staff has added Questions 101.02 and 101.03 to provide guidance on business combination transactions, including information on providing non-GAAP financial measures in certain forecasts.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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Summary
- A U.S. shareholder in a foreign corporation is potentially liable for the Transition Tax, added by the 2017 Tax Cuts and Jobs Act under Code Sec. 965.
Mandatory One-Time Tax on Accumulated Offshore Earnings
The transition tax is a mandatory one-time tax on the untaxed post-1986 foreign earnings of certain foreign corporations of U.S. shareholders. The tax is determined by reference to the foreign corporation's post-1986 foreign earnings for its last tax year, beginning before January 1, 2018. Accordingly, for calendar year foreign corporations with tax years ending on December 31, 2017, the tax could be due and payable with the taxpayer's 2017 return. This is because the foreign corporation's tax year ends during a fiscal taxpayer's 2017 tax year or with a calendar year taxpayer's 2017 tax year. For fiscal year foreign corporations, the last tax year beginning before January 1, 2018 (e.g., December 1, 2017) will end during or with a taxpayer's 2018 tax year and the return is due with the 2018 return.
We can examine your foreign stockholdings to determine if the tax applies to you. The rules for computing the transition tax are complex and guidance issued by the Treasury and IRS provide additional rules for computing the correct transition tax. To ensure that the tax is correctly computed, we will need to gather additional information based on this guidance. We can also discuss various elections that may be made to pay the tax in installments or defer the tax.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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IASB Releases Revised Conceptual Framework
Summary -
The International Accounting Standards Board (IASB) has issued the revised Conceptual Framework for Financial Reporting (Conceptual Framework) that underpins International Financial Reporting Standards (IFRS).
The Conceptual Framework provides the fundamental concepts of financial reporting that guide the IASB in developing IFRSs. It also helps ensure that IFRSs are conceptually consistent and that similar transactions are treated the same way. In this way, the Conceptual Framework and IFRS provide consistent and useful information for investors and others.
The Conceptual Framework also assists companies in developing accounting policies. The Conceptual Framework provides companies with guidance in situations and transactions that no IFRS addresses directly. It also helps stakeholders understand IFRSs more broadly.
The revised Conceptual Framework includes:
- A new chapter on measurement;
- Guidance on reporting financial performance;
- Improved definitions and guidance, particularly including the definition of a liability; and
- Clarifications in important areas, such as the roles of stewardship, prudence, and measurement uncertainty in financial reporting.
Concomitantly with the Conceptual Framework, the IASB has issued a Basis for Conclusions and Amendments to References to the Conceptual Framework in IFRS Standards to update references in IFRS Standards to previous versions of the Conceptual Framework.
The IASB has also published free supporting materials for the revised Conceptual Framework, including:
- Project summary;
- Feedback statement with the IASB responses to stakeholder comments during the consultation period;
- Fact sheet; and
- Web video Debrief introduction to the Conceptual Framework, featuring Hans Hoogervorst.
For more information, click here.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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IASB Proposed Amendments to IAS 8 on Accounting Policy Change
Summary -
The IASB has released the exposure draft, Accounting Policy Changes (Proposed Amendments to IAS 8) (Exposure Draft). The Exposure Draft proposes narrow-scope amendments to International Accounting Standards (IAS) 8, Accounting Policies, Changes in Accounting Estimates and Errors. The comment deadline is July 27, 2018.
IAS 8 provides requirements for selecting and changing accounting policies. The circumstances under which companies would change accounting policies include the adoption of new requirements under International Financial Reporting Standards (IFRS) or when an accounting change would provide better information for financial statement users. IAS 8 requires a company that changes an accounting policy to apply the new policy as if it had always applied that policy. This requirement does not apply in situations where such application is not practicable.
A company also may decide to change an accounting policy based on an agenda decision published by the IFRS Interpretations Committee (IFRIC). IFRIC considers questions of application of IFRS to particular situations. IFRIC evaluates particular situations and decides whether to recommend amendments or additions to IFRS and provides reasoning for their conclusion. Although IFRIC agenda decisions are non-authoritative, they include explanations on application of IFRSs.
The Exposure Draft proposes guidance on deciding how far back to apply a change in accounting policy that results from an agenda decision. The proposal, if adopted in its present form, provides that in deciding how far back to apply an accounting policy change, the company is to consider not only whether the change is practicable, but should perform a cost benefit analysis of the change. That analysis should consider the benefits to users and the costs to the company of making the change.
The IASB's purpose in proposing these narrow-scope amendments is to promote greater consistency in IFRS application, reduce company burdens in changing accounting policies resulting from an agenda decision, and improve financial reporting.
For more information, click
here
.
© 2018 CCH Incorporated and/or its affiliates. All rights reserved. Used with permission.
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