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On March 13, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-05 Income Taxes (Topic 740) – Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin No. 118. The ASU makes amendments to ASC Topic 740 Income Taxes (ASC 740) to incorporate guidance released by the Securities Exchange Commission (SEC) in its Staff Accounting Bulletin (SAB) No. 118, codified as SEC SAB Topic 5.EE Income Tax Accounting Implications of the Tax Cuts and Jobs Act. The ASU exclusively assists entities in applying ASC 740 with respect to the Tax Cuts and Jobs Act (the Act), and should not be applied for any other changes in United States tax laws.
ASC 740 does not currently address the appropriate application of ASC 740 in situations where an entity does not have the necessary information available, prepared, or analyzed (including computations) in reasonable detail to complete the accounting for certain income tax effects of the Act for the reporting period in which the Act was enacted. This ASU provides guidance on this topic and also provides relevant illustrative examples.
The amendments reflect guidance consistent with the principles under ASC 805 Business Combinations. Specifically, the ASU provides the following clarifications:
Entities should include financial statement disclosures about the material impacts of the Act for which the accounting under ASC 740 is incomplete, including:
To access the full script of ASU No. 2018-05, click here.
To access the full script of the SEC SAB Topic 5.EE Income Tax Accounting Implications of the Tax Cuts and Jobs Act, click here.
For more information on the financial reporting library, contact a local MNP Assurance Professional, or Jody MacKenzie, Director, Assurance Professional Standards.
This communication contains a general overview of the topic and is current as of March 13, 2018. The application of the principles addressed will depend upon the particular facts and circumstances of each individual case. Accordingly, this publication is not a substitute for professional advice and we recommend that any decisions you take about the application or not of any of the information presented be made in consultation with a qualified professional, who can address any variance that may be required to reflect your circumstances. Please contact your local MNP representative for customized assistance with the application of this material. MNP LLP accepts no responsibility or liability for any loss related to any person's use of or reliance upon this material. © MNP LLP 2018. All rights reserved.
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