C.8 Presentation and Disclosure
C.8.1 Presentation
ASC 323-740
45-2 Under
the proportional amortization method, the amortization
of the investment in the limited liability entity is
recognized in the income statement as a component of
income tax expense (or benefit). The current tax expense
(or benefit) shall be accounted for pursuant to the
general requirements of Topic 740.
ASC 323-740 requires the amortization of investments accounted
for under the proportional amortization method to be recognized as a component
of income tax expense (benefit). However, it does not address the balance sheet
presentation of such investments. EITF Issue 13-B, which resulted in the
issuance of ASU 2014-01, stated that QAHP “investments do not have the
characteristics of deferred tax assets and [that the EITF] agrees with the
stakeholders that deferred tax asset classification could have significant and
adverse consequences for both financial reporting and regulatory capital
purposes.” It further noted:
FASB staff does not believe that the Task Force needs to
prescribe a balance sheet classification for the purpose of achieving
symmetry with the income statement classification. The FASB staff
believes that the presentation of those tax credit investments as
investments is reasonable and appropriate but, because reporting
entities often include such investments in other asset captions, the
staff recommends not prescribing a specific balance sheet
presentation.
As a result, in deliberating ASU 2014-01, the EITF did not
prescribe a specific balance sheet presentation for QAHP investments. On the
basis of this lack of guidance, there is diversity in practice in the balance
sheet presentation of investments in QAHPs. While such investments should not be
presented as DTAs, it may be appropriate to present them as an investment asset
or as a component of other assets.
C.8.2 Disclosure
ASC 323-740
50-1 A
reporting entity that invests in a qualified affordable
housing project shall disclose information that enables
users of its financial statements to understand the
following:
-
The nature of its investments in qualified affordable housing projects
-
The effect of the measurement of its investments in qualified affordable housing projects and the related tax credits on its financial position and results of operations.
50-2 To meet
the objectives in the preceding paragraph, a reporting
entity may consider disclosing the following:
-
The amount of affordable housing tax credits and other tax benefits recognized during the year
-
The balance of the investment recognized in the statement of financial position
-
For qualified affordable housing project investments accounted for using the proportional amortization method, the amount recognized as a component of income tax expense (benefit)
-
For qualified affordable housing project investments accounted for using the equity method, the amount of investment income or loss included in pretax income
-
Any commitments or contingent commitments (for example, guarantees or commitments to provide additional capital contributions), including the amount of equity contributions that are contingent commitments related to qualified affordable housing project investments and the year or years in which contingent commitments are expected to be paid
-
The amount and nature of impairment losses during the year resulting from the forfeiture or ineligibility of tax credits or other circumstances. For example, those impairment losses may be based on actual property-level foreclosures, loss of qualification due to occupancy levels, compliance issues with tax code provisions, or other issues.
QAHP investors may need to provide certain additional disclosures owing to the
unique nature of these investments. ASC 323-740-50-1 addresses the overall
disclosure objectives for QAHP investments, which include disclosure of (1) the
nature of the investment in the QAHP and (2) the effect of the investment on the
investor’s financial position and results of operations. By contrast, ASC
323-740-50-2 provides example disclosures that can be made by an investor to
meet the objectives outlined in ASC 323-740-50-1. The guidance in ASC 323-740-50
is applicable regardless of whether the proportional amortization method is
applied.