Article
Tax and accounting changes may impact your company’s financial statements
March 20, 2019 · Authored by Rich Croghan, Kevin Hasegawa
Changes to tax law and revisions to accounting topics, such as lease accounting and revenue recognition standards, could significantly affect income tax reporting on your company’s generally accepted accounting principles (GAAP) financial statements.
That means many businesses will need to consider a number of new items with their tax provisions when preparing financial statements. They’ll also need to address changes introduced by the 2017 tax reform reconciliation act, often referred to as the Tax Cuts and Jobs Act (TCJA). See our Alert for a summary of the provisions.
Here’s a look at revisions your company may need to consider when preparing this year’s financials.
Provisional estimates
Companies that have relied on the SEC Staff Accounting Bulletin (SAB) 118 and haven’t yet finalized their provisional estimates for the TCJA will need to complete and disclose the results of those estimates within the 12-month measurement period that began in December 2017.
Revenue recognition
Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers, fundamentally changes how many companies recognize revenue.
The tax implications of adopting ASC 606 — as well as changes to the tax law enacted as part of the TCJA — may result in new book-tax adjustments, the need to file tax accounting method-change requests, or both. These change requests may or may not be eligible for automatic consent, which could alter the reporting period when they first apply for tax purposes. To reduce future surprises, companies should address both the financial statement and tax implications of changes to revenue recognition early in the process.
For a comprehensive overview of the new standard, see our guide.
Effective dates
- Public entities. The standard is effective for annual reporting periods beginning after Dec. 15, 2017.
- Nonpublic entities. The standard is effective for annual reporting periods beginning after Dec. 15, 2018.
The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.