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IRS issues guidance on Tax Act’s deemed repatriation rules.
The IRS has issued a news release regarding various aspects of the upcoming 2018 tax season, including the fact that the earliest that refunds will be available with respect to returns containing either the earned income tax credit (EITC) or the additional child tax credit (ACTC) will be February 27, 2018. The IRS has also noted that many software companies and tax professionals will accept tax returns before the beginning of tax season and will then submit the returns when the IRS’s systems open. Although the IRS began accepting both electronic and paper tax returns on January 29, paper returns will begin processing in mid-February.
Tax law may lead to changes in U.S. GAAP.
At its January 10 meeting, FASB discussed whether it needs to make a change to its accounting standard for income taxes to minimize the effect on reported earnings from the Tax Cuts and Jobs Act (TCJA). FASB also plans to discuss several implementation questions about applying the new tax law to its guidance for income tax accounting. If FASB agrees to make a change, it will have to float a proposal for public comment before making the final update to U.S. GAAP.
Proposed changes to lease standard offer simpler transition.
Companies adopting FASB’s sweeping new lease standard would get a break on the transition process under a proposed change. FASB has agreed to propose the easier transition method after hearing complaints from businesses and professional groups that collecting data for everything from telephones to truck rentals was a significant undertaking. “As entities have started to implement the new lease requirements, many preparers have cited their plan to implement new systems and are observing some unanticipated costs and complexities associated with the modified retrospective transition method, particularly the comparative period reporting requirement,” FASB said. The proposal also offers relief to landlords and other lessors, allowing them to forego parsing out the price of so-called “common-area maintenance,” such as snow removal and security, from the value of the base rents they charge tenants.
Staff guidance updated to provide more help with reporting of audit firm tenure.
On December 28, 2017, the PCAOB updated its staff guidance to help accounting firms comply with the requirements for the expanded audit reports they will have to begin filing in 2018. The update gives additional information to guide accounting firms when determining the tenure, or length of time they have served a client, that should be reported. “In the absence of other evidence about when the auditor signed an initial engagement letter or began performing audit procedures, tenure can be determined based on the year in which the auditor first issued an audit report on the company’s financial statements or, if earlier, the auditor’s estimate of when work would have commenced to enable the issuance of such report,” the update states. The PCAOB said it will monitor implementation of the new requirements and issue additional guidance as necessary.
Public companies urged to focus on effect of new standards on internal controls.
The SEC wants public companies to pay close attention to how the adoption of some of FASB’s major standards may affect their financial reporting controls in 2018 and beyond, according to a speech given at the AICPA Conference on Current SEC and PCAOB Developments on December 4, 2017, in Washington. The new revenue standard becomes effective in 2018, and the lease accounting standard becomes effective in 2019; public companies and their auditors are expected to face a number of challenges in testing internal controls and ensuring that they are sound. “Internal control that is effective within one set of conditions may not necessarily be effective when those conditions change significantly,” said Michael Dusza, a professional accounting fellow with the SEC. “Adoption of the new accounting standards for revenue, leases, and credit losses may be akin to a significant, complex, or unusual transaction for many companies and, like those transactions, it will put the design of companies’ [internal control over financial reporting] ICFR to test.”