Alert: FASB Accounting Standards Update No. 2018-02 – Income Statement: Reporting Comprehensive Income

Category: US GAAP

Alert: FASB Accounting Standards Update No. 2018-02 – Income Statement: Reporting Comprehensive Income

On February 14, 2018, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2018-02 Income Statement – Reporting Comprehensive Income (Topic 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income. The ASU eliminates certain “stranded tax effects” resulting from the Tax Cuts and Jobs Act enacted by the United States (U.S.) federal government on December 22, 2017.

The Tax Cuts and Jobs Act reduced the U.S. federal corporate income tax rate. Current U.S. Generally Accepted Accounting Principles (“US GAAP”) requires any effect of a change in tax laws or rates be presented in income from continuing operations in the reporting period that includes the enactment date. Therefore, the tax effects of items within accumulated other comprehensive income (AOCI) will not reflect the new tax rate (referred to as the “stranded tax effects”). The ASU allows entities to elect to eliminate any stranded tax effects in AOCI by reclassifying them to retained earnings, while providing informative disclosures about the stranded tax effects. Alternatively, entities choosing not to make the election are required to disclose that such an election was not made.

The amendments under ASU No. 2018-02 are effective for all entities for fiscal years beginning after December 15, 2018, including interim periods therein. The amendments should be applied either in the period of adoption, or retrospectively to each period(s) in which the effect of the change in the tax rate is recognized. Early adoption is permitted for any reporting periods, including any interim period, for which financial statements have not yet been issued (for public business entities) or made available for issuance (for all other entities).

To access the full script of ASU No. 2018-02, click here.

This communication contains a general overview of the topic and is current as of February 26, 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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Michelle Balmer

Michelle Balmer CPA, CA

Vice President, Assurance

Michelle Balmer, CPA, CA, is a Senior Assurance Services Partner with MNP. With 14 years of experience in public practice, Michelle helps a broad range of public and privately held companies in a variety of industries. She also works on special projects, including costing studies, benchmarking and best-practice studies, operational analyses, litigation support and due diligence.

As a key member of MNP's Assurance team, Michelle has played an instrumental role in assurance policy development, implementing accounting and assurance standards firm-wide and educating assurance practitioners regarding methodologies and new pronouncements. She also provides technical advice and consultation on accounting and assurance issues, as well as on rules of professional conduct issues, to all MNP practitioners.

Michelle was certified a Chartered Accountant (CA) after obtaining a Bachelor of Commerce degree from the University of Alberta. She has been actively involved with the Institute of Chartered Accountants of Alberta, including the Chartered Accountants School of Business, in an instructional and marketing capacity. An avid volunteer, she has assisted numerous groups such as the Easter Seals of Alberta, Paralympic Sports Association and Junior Achievement of Northern Alberta.