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Businesses will Face New Standards for Presenting Deferred Taxes in the Future by Robert C. Aldir, CPA


Posted on February 16, 2016 by Robert Aldir

The Financial Accounting Standards Board (FASB) has issued new accounting methods intended to reduce the complexity businesses encounter when presenting deferred income tax assets and liabilities on their financial statements.

 

Under the current U.S. Generally Accepted Accounting Principles (GAAP), a business must expend a significant amount of time, effort and costs to separate deferred income tax assets and liabilities between current and noncurrent amounts in a classified statement of its financial position.  Under the new standard, however, businesses will be required to classify both deferred tax assets and liabilities as noncurrent in their financial statements. As a result of this update, GAAP reporting will better align with the requirements of the International Financial Reporting Standards, which aims to be a universal method for businesses to prepare their financial statements and report their financial positions to stakeholders throughout the world.

 

The new standards for reporting deferred taxes will apply to public companies beginning after December 15, 2016. For all other entities, including private companies and not-for-profits, the standards will go into effect after December 15, 2017, for those businesses issuing financial statements for annual periods, or after December 18, 2018, for interim period reporting.

 

Should an entity elect to apply the new standards before the required dates, it must disclose in the first interim and first annual period of change the following information:

  1. The nature of and reason for the change in accounting principle, and
  2. A statement that prior periods were not retrospectively adjusted.

Entities that elect to apply this guidance retrospectively should disclose in the first interim and first annual period of change the following information:

  1. The nature of and reason for the change in accounting principle, and
  2. Quantitative information about the effects of the accounting change on prior periods.

 

About the Author: Robert C. Aldir, CPA, is an associate director with Berkowitz Pollack Brant’s Audit and Attest Services practice, where he provides accounting, auditing and litigation-support counsel to public and privately help companies located throughout the world.  He can be reached in the CPA firm’s Miami office at (305) 379-7000 or via email at info@bpbcpa.com.