Brief Overview of Tax Cuts and Jobs Act of 2017 Impacts on Tax Provisions
The Tax Cuts and Jobs Act of 2017 (TCJA) changed a variety of tax law sections that have a flow-through impact on the tax provision in the financial statements. Some of the most significant changes, include:
- Staff Accounting Bulletin 118 (SAB118). SEC SAB 118 and related FASB ASU 2018-05 allowed companies to finalize and fully record the impact of TCJA on their 2017 financials, develop reasonable estimates of the impact, or record income tax accounting based on tax law in effect before the December 22, 2017 effective date. The rules required that those who used either of the last two options finalize and record the actual impact within one year of the effective date.
- Naked credit and valuation allowance considerations. Companies may need to reassess the amount of valuation allowance needed if a “naked credit” deferred tax liability (DTL) exists.
- GILTI and FDII. Year-end calculations of these amounts will require taxpayers to calculate the value of U.S. and foreign depreciable assets using the Alternative Depreciation System (ADS).
- ASC Topic 740-30-25 (Formerly: APB 23). The TCJA’s provisions related to deemed repatriation of earnings accumulated in overseas subsidiary has necessitated a revisiting of certain assertions that are the basis of financial statement presentation of accumulated overseas earnings.
- Return to Provision (RTP) Adjustments. This calculation was affected by the TCJA’s reduction in corporate tax rates. Because of the rate reduction from 35 percent to 21 percent effective January 1, 2018, a calendar year-end corporation’s tax rate will be affected by any RTP temporary adjustments.
- Fiscal-Year Filers. Fiscal-year filers who extended their returns have a variety of provisions to consider when preparing their tax returns. This includes a blended rate to reflect the months when the 35 percent rate applied and those covered by the 21 percent rate.
- Rate Reconciliation. Several provisions in the TCJA will affect the rate reconciliation in this year-end that have not had an effect in the past.
For a more detailed discussion, we recommend that you download our recent whitepaper, “2018 ASC 740 Year-End Considerations” here.
The complexities of these tax reform changes and their impact on your situation should be discussed with your tax advisor as soon as possible. Call us at 716. 847.2651 or connect with us by clicking here.View full article
It has been a busy year for the Financial Accounting Standards Board (FASB). A number of accounting rule changes have been promulgated that will have a flow-through impact on the tax provision in the financial statements. These include:
- ASC 606 Revenue Recognition. New rules are in effect that require companies to use a 5-step process to determine when revenue should be recognized. Once the GAAP treatment is determined, the effect of the changes must also be reflected in the tax provision.
- ASU 2015-17 Classification of all deferred tax liability and assets as non-current. This change became effective for all entities effective for periods beginning after December 31, 2017.
- ASU 2016-09 Stock Compensation. All excess tax benefits or deficiencies must be treated as tax expense in the income statement without regard to any reduction in current-period taxes payable caused by the benefits.
- ASU 2016-16 transactions other than inventory. For years beginning after December 15, 2018, all entities are required to use current accounting for intercompany transactions with the exception of inventory transactions.
- ASU 2018-2 Reclassification of disproportionate tax effects on OCI. Effective for years beginning after December 15, 2018, companies can elect to reclassify “trapped” taxes from accumulated other comprehensive income (OCI) to retained earnings.
- ASU 2018-11 Leasing Standard. This guidance provided updates to ASC 842, Accounting for Leases. It focused on two main areas: transitioning to the new standard and separating the components of a contract.
For a more detailed discussion, we recommend that you download our recent whitepaper, “2018 ASC 740 Year-End Considerations” here.View full article