The FASB introduces a new method of accounting for investments in qualified affordable housing projects.
The FASB issued ASU 2014-01 in January 2014 to revise the accounting for investments in qualified affordable housing projects.
The ASU modifies the conditions that must be met to present the pretax effects and related tax benefits of such investments as a component of income taxes (“net” within income tax expense). It is expected that the new guidance will enable more investors to use a “net” presentation for investments in qualified affordable housing projects. Investors that do not qualify for “net” presentation under the new guidance will continue to account for such investments under the equity method or cost method, which results in losses recognized in pretax income and tax benefits recognized in income taxes (“gross” presentation of investment results).
For investments that qualify for the “net” presentation of investment performance, the ASU introduces a “proportional amortization method” that can be elected to amortize the investment basis. If elected, the method is required for all eligible investments in qualified affordable housing projects.
The ASU is effective for annual periods beginning after December 15, 2014; early adoption is permitted.
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