A&M Tax Advisor Weekly

A New Year of Work is Given a Small Reprieve: FASB Exposure Draft and the SEC Issues New Guidance on ASC 740 Reporting

Matthew Fricke, Managing Director

mfricke@alvarezandmarsal.com

Albert Liguori, Managing Director

aliguori@alvarezandmarsal.com

Douglas Sayuk, Managing Director

dsayuk@alvarezandmarsal.com

January 10, 2018 / North America

During its January 10, 2018 board meeting, the Financial Accounting Standards Board (FASB) discussed the application of tax reform as it relates to ASC 740, Accounting for Income Taxes. Included in the discussion were items such as tax effects of accumulated other comprehensive income, discounting of taxes associated with deemed repatriation and refunds of AMT credit carryforwards, and accounting for global intangible low-taxed income and base-erosion anti-abuse tax. Final guidance is expected in the coming months, as the FASB will issue an exposure draft with a comment period of 15 days to follow.

Why did FASB act so quickly in its commentary? Just in time for the new year — and the new wave of reporting obligations under the Tax Cuts and Jobs Act of 2017 — the Securities and Exchange Commission (SEC) issued guidance that will give companies some flexibility as they prepare their annual and quarterly financial statements.

While this guidance applies to all aspects of the new tax law, it will be of particular use for U.S.-based multinational companies in computing the taxes arising from the one-time deemed repatriation of their historical foreign earnings accumulated offshore (the toll charge). This analysis will often require extensive evaluations and computations for each specified foreign corporation’s earnings and profits (E&P) and tax pools — a task that could prove challenging on such short notice.

Acknowledging the tight timeline, the SEC has issued Staff Accounting Bulletin No. 118 (SAB 118), which advises on the application of U.S. GAAP in circumstances where a company does not have the necessary information available, prepared or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Tax Cuts and Jobs Act. In such cases, SAB 118 provides an expanded timeline for companies that, for example, have previously not calculated their foreign E&P to make the necessary reviews and computations to comply with the new tax law and make accurate financial disclosures.

Background
On December 22, 2017, President Trump signed into law the Tax Cuts and Jobs Act of 2017…

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North America