The Financial Accounting Resource Center™ is a comprehensive research service that provides the full text of standards, the latest news from the Accounting Policy & Practice Report ®,...
Companies that adopted a new revenue recognition accounting standard last year—earlier than they had to—will get targeted guidance from the IRS that conforms to the new tax law, an official said.
“There’s an urgent need to get that out,” said Scott Dinwiddie, associate chief counsel (Income Tax and Accounting). Longer-term guidance on the tax law changes will follow, he said.
The Internal Revenue Service was already drafting a revenue procedure to help businesses with the Financial Accounting Standards Board’s revenue recognition standard. The standard—ASC 606, Revenue from Contracts with Customers—took effect for public companies in 2018 and for private companies in 2019. Companies could adopt it beginning Jan. 1, 2017, if they wanted to.
The 2017 tax act ( Pub. L. No. 115-97) made changes that “we need to fully digest” to finish drafting the guidance so that it makes sense for businesses that early-adopted the standard before the changes were enacted, Dinwiddie said Feb. 9 at the American Bar Association Section of Taxation meeting in San Diego.
The guidance, which will address accounting method change issues and procedures stemming from the FASB standard, needs to be modified “so that it’s not inaccurate or misleading or otherwise too broad,” he said.
The tax law revised the rules associated with the recognition of income by amending tax code Section 451. It requires a taxpayer that uses the accrual method of accounting to recognize income no later than the taxable year in which the income is taken into account as revenue on an audited financial statement or another applicable financial statement. The law provides an exception for long-term-contract income.
The law also codified a 2004 revenue procedure that allows taxpayers to defer inclusion of income associated with certain advance payments to the end of the tax year following the year it is received, provided that the income is deferred for financial statement purposes.
Some of what the IRS was hoping to clarify in its revenue procedure on ASC 606 was answered by the changes in the tax law, Dinwiddie said. But the answers are only provided on a prospective basis, because the tax law provisions are effective for years after 2017, he said.
Early adopters still have questions about their accounting method changes to comply with ASC 606, Dinwiddie said. For example, they may have made allocations for book purposes, and they will want to know “whether those will be respected for tax purposes under the change procedures,” he told Bloomberg Tax after a panel discussion.
Once the early-adopter project is complete, the agency will turn its attention to longer-term guidance on the tax law’s changes to Section 451, he said.
To contact the reporter on this story: Allyson Versprille in San Diego at email@example.com
To contact the editor responsible for this story: Meg Shreve at firstname.lastname@example.org
Copyright © 2018 Tax Management Inc. All Rights Reserved.
All Bloomberg BNA treatises are available on standing order, which ensures you will always receive the most current edition of the book or supplement of the title you have ordered from Bloomberg BNA’s book division. As soon as a new supplement or edition is published (usually annually) for a title you’ve previously purchased and requested to be placed on standing order, we’ll ship it to you to review for 30 days without any obligation. During this period, you can either (a) honor the invoice and receive a 5% discount (in addition to any other discounts you may qualify for) off the then-current price of the update, plus shipping and handling or (b) return the book(s), in which case, your invoice will be cancelled upon receipt of the book(s). Call us for a prepaid UPS label for your return. It’s as simple and easy as that. Most importantly, standing orders mean you will never have to worry about the timeliness of the information you’re relying on. And, you may discontinue standing orders at any time by contacting us at 1.800.960.1220 or by sending an email to email@example.com.
Put me on standing order at a 5% discount off list price of all future updates, in addition to any other discounts I may quality for. (Returnable within 30 days.)
Notify me when updates are available (No standing order will be created).
This Bloomberg BNA report is available on standing order, which ensures you will all receive the latest edition. This report is updated annually and we will send you the latest edition once it has been published. By signing up for standing order you will never have to worry about the timeliness of the information you need. And, you may discontinue standing orders at any time by contacting us at 1.800.372.1033, option 5, or by sending us an email to firstname.lastname@example.org.
Put me on standing order
Notify me when new releases are available (no standing order will be created)