The Financial Accounting Standards Board (FASB) Staff recently issued Q&As to address certain issues constituents have raised with respect to accounting for the Tax Cuts and Jobs Act (TCJA). Our summary analyses of FASB Staff Q&As issued as of Jan. 22, 2018, are as follows:
Whether private companies and not-for-profit entities can apply SAB 118 - In this Q&A, the FASB staff states that they would not object to private companies and not-for-profit organizations applying the guidance in SEC Staff Accounting Bulletin (SAB) 118, which provides for a measurement-period mechanism for purposes of accounting for the effects of the TCJA that are provisional, or are not able to be reasonably estimated, at the date the financial statements are issued or released. Under SAB 118, in cases where the entity can make a reasonable estimate of the accounting effects of applying Topic 740, Income Taxes, of the FASB’s Accounting Standards Codification (ASC) to the TCJA, it should record that estimate and make appropriate disclosures. If a reasonable estimate of those effects cannot be made, the entity should not record anything, but should provide appropriate disclosure. If a private company or a not-for-profit entity applies SAB 118, it should apply all relevant aspects of the SAB in its entirety, including the disclosures in SAB 118, and should disclose its accounting policy of applying SAB 118 in accordance with ASC paragraphs 235-10-50-1 through 50-3.
Whether to discount the tax liability on the deemed repatriation - Per this Q&A, the tax liability on the deemed repatriation of undistributed and previously untaxed post-1986 foreign earnings and profits (which may be paid over an eight-year period on an interest-free basis) should not be discounted. Further, the FASB staff does not believe that Subtopic 835-30 on the imputation of interest applies to the unique circumstances related to this tax liability.
Whether to discount alternative minimum tax credits that become refundable - The FASB staff believes that neither any alternative minimum tax (AMT) credit carryforwards presented as a deferred tax asset nor any AMT credit carryforwards presented as a receivable should be discounted. The FASB staff also notes that ASC 740-10-50-3, which requires disclosure of the amounts of tax credit carryforwards for tax purposes, applies whether an entity presents the AMT credit carryforward as a deferred tax asset or a receivable.
Accounting for the base erosion anti-abuse tax - This Q&A states that an entity subject to the base erosion anti-abuse tax (BEAT) should measure deferred tax assets and liabilities using the statutory tax rate under the regular tax system. The incremental effect of the BEAT should be recognized in the year the BEAT is incurred.
Accounting for global intangible low-taxed income -The FASB staff believes that ASC 740 is not clear as it relates to the accounting for the global intangible low-taxed income (GILTI) provisions of the TCJA. Therefore, an entity may choose either of the following interpretations of ASC 740:
- Recognize the tax on GILTI in the period in which it is incurred
- Recognize deferred tax assets and liabilities when basis differences exist that are expected to affect the amount of GILTI inclusion upon reversal
The entity should disclose the accounting policy chosen.
See our Jan. 3, 2018, Tax Alert for further information on the financial statement implications of the TCJA.