SOLOMON BIEN
CERTIFIED PUBLIC ACCOUNTANT
News
New guidance on classification of deferred taxes
ASU 2015-17 – Balance Sheet Classification of Deferred Taxes
Under the new guidance of ASU 2015-17, deferred tax assets and liabilities are classified as non-current on classified balance sheets. This is effective for public companies in annual and interim periods beginning after 12/15/2016 and is effective for other companies in annual periods beginning after 12/15/2017 and in interim periods beginning after 12/15/2018. Early adoption is permitted.
Please contact Solomon for assistance in implementing this new guidance in your income tax provision and in determining what effects this guidance may have on your financial ratios or capital requirements.
New guidance on intra-group sales in the tax provision
ASU 2016-16 – Intra-Entity Transfers of Assets Other Than Inventory
Under current GAAP, neither current nor deferred taxes are recognized on the transfer of assets between entities in the same GAAP consolidated group. Rather, such taxes are recognized only when the assets are sold to an entity outside the group. This can result in differences in the timing of the recognition of taxes for GAAP and tax purposes in cases where the consolidated/combined group contains a different population of members for GAAP and tax purposes (for example, when a GAAP consolidated group includes a non-U.S. entity or when states require the filing of separate company tax returns). The new guidance of ASU 2016-16 states that an entity should recognize the tax consequences of an intra-group asset transfer when the transfer is made. This guidance applies to the transfer of assets other than inventory. This is effective for public companies in annual and interim periods beginning after 12/15/2017 and is effective for other companies in annual periods beginning after 12/15/2018 and in interim periods beginning after 12/15/2019. Early adoption is permitted.
Please contact Solomon for assistance in implementing this new guidance in your income tax provision and in determining whether it may be more beneficial for you to transfer fixed assets, intellectual property, or other assets between entities either before or after adoption of this new guidance.
New guidance on equity compensation in the tax provision
ASU 2016-09 – Improvements to Employee Share-Based Payment Accounting
The new guidance of ASU 2016-09 changes how a company accounts for differences between GAAP and tax equity compensation amounts. Currently, such differences are recorded either as income tax expense or against APIC, depending on whether the GAAP or tax equity compensation amount is higher and depending on the company's cumulative historic GAAP and tax equity compensation amounts. Under this new guidance, all differences between GAAP and tax equity compensation amounts are recorded as income tax expense. ASU 2016-09 also changes how certain tax amounts related to equity compensation are presented on the Statement of Cash Flows. This is effective for public companies in annual and interim periods beginning after 12/15/2016 and is effective for other companies in annual periods beginning after 12/15/2017 and in interim periods beginning after 12/15/2018. Early adoption is permitted.
Please contact Solomon for assistance in implementing this new guidance in your income tax provision. Solomon can help you plan the best timing for adoption of this new guidance, based on the expected vesting and/or exercising of your outstanding equity compensation instruments.
