FASB Proposes Improvements to Income Tax Accounting Related to the Tax Cuts and Jobs Act
Norwalk, CT, January 18, 2018—The Financial Accounting Standards Board (FASB)
today issued a proposed Accounting Standards Update (ASU) intended to
help organizations reclassify certain stranded income tax effects in
accumulated other comprehensive income resulting from the Tax Cuts and
Jobs Act of 2017. Stakeholders are encouraged to review and provide
comments on the proposed improvements by February 2, 2018.
“After the Tax Cuts and Jobs Act was enacted, stakeholders expressed
concerns about current Generally Accepted Accounting Principles (GAAP)
that required organizations to adjust deferred tax liabilities and
assets after a change in tax laws or rates,” stated FASB Chairman Russell G. Golden.
“This proposed ASU will eliminate the stranded tax effects associated
with the Act’s change in the federal corporate income tax rate, while
improving the usefulness of information reported to financial statement
The proposed ASU requires financial statement preparers to reclassify
stranded tax effects within accumulated other comprehensive income to
retained earnings in each period in which the effect of the change in
the U.S. federal corporate income tax rate in the Tax Cuts and Jobs Act
of 2017 (or portion thereof) is recorded. The amount of the
reclassification would be the difference between the historical
corporate income tax rate and the newly enacted 21 percent corporate
income tax rate.
In the period of the reclassification, organizations would make the following transition disclosures:
The proposed amendments would be effective for all organizations for
fiscal years beginning after December 15, 2018, and interim periods
within those fiscal years. Early adoption would be permitted.
Organizations would apply the proposed amendments retrospectively to
each period (or periods) in which the effect of the change in the U.S.
federal corporate income tax rate in the Tax Cuts and Jobs Act of 2017
- The nature and reason for the change in accounting principle
- A description of the prior-period information that has been retrospectively adjusted, and
- The effect of the change on affected financial statement line items.
The proposed ASU is available on the FASB website.
About the Financial Accounting Standards Board
Established in 1973, the FASB is the independent, private-sector,
not-for-profit organization based in Norwalk, Connecticut, that
establishes financial accounting and reporting standards for public and
private companies and not-for-profit organizations that follow Generally
Accepted Accounting Principles (GAAP). The FASB is recognized by the
Securities and Exchange Commission as the designated accounting standard
setter for public companies. FASB standards are recognized as
authoritative by many other organizations, including state Boards of
Accountancy and the American Institute of CPAs (AICPA). The FASB
develops and issues financial accounting standards through a transparent
and inclusive process intended to promote financial reporting that
provides useful information to investors and others who use financial
reports. The Financial Accounting Foundation (FAF) supports and oversees
the FASB. For more information, visit www.fasb.org.