Enactment of US tax reform legislation appears imminent. Such a major overhaul of the US tax code is not without its challenges, including significant impacts on financial statement reporting. Considering there is no grace period for recognizing the tax effects in the period of enactment, companies should be preparing for the potential change. To aid in the assessment of the financial reporting implications, we have summarized key proposals from both the House and the Senate bills along with related accounting for income tax considerations under US GAAP.
Enactment of US tax reform has the potential to be one of the most significant and impactful policy developments in many years and will bring with it complex, wide-ranging impacts in financial reporting. While the effect will vary significantly between companies, it is expected that implementing and accounting for reform will be a challenging exercise. Notwithstanding the difficulty involved, the accounting guidance requires recognition of the tax effects of tax law changes in the period in which the law is enacted. As a result, while many items remain in question, including the specific provisions that will be included in the final bill, companies should act now to begin modeling the potential implications in financial reporting to ensure they are prepared to account for these changes in the period of enactment and/or disclose the expected effects of the tax law change to investors and other users of their financial statements.
US TAS Market Leader, PwC US