The FASB approves the tax reform

The Financial Accounting Standards Board voted to approve an accounting standard update that would allow more companies to opt for a more conservative approach to their debt investments.

During a meeting on Wednesday, the FASB voted to allow institutions that choose to use an online lending method-credit-program-to -tax-payment-program. In August the FASB and its Special Issues Group issued a show pictures after some questions arose about an accounting situation in 2014 that allowed companies to choose to use the depreciation method to save investments mostly for the purpose of receiving income tax credits and other income tax benefits (see stories). The guidance issued by the FASB in 2014 limited the allocation of funds to investments in the Low Income Tax Credit.

Under the amortization method, the company amortizes the initial cost of the investment based on the distribution of income taxes and other benefits of income tax and recognize the relief and grant of income tax and other tax benefits in the income statement as part of the tax expense or benefits. Investments in other types of tax credit investments are generally accounted for using the same method or cost.

FASB, GASB and FAF logos on the wall at the headquarters in Norwalk, Connecticut

Courtesy of GASB

The original guidance limited the option to taxable income of low-income households, but over the years, the FASB has heard requests from companies asking whether they can choose to use the expense method compared to investments. Equally, tax credits are available through other programs, such as the New Markets Tax Credit, the Historic Renewables Tax Credit and the Renewable Energy Tax Credit. They pointed out that estimating the distribution method provides financial statements with a better understanding of the returns on the investments being made. calculated for the purpose of obtaining income tax credits and other income tax benefits in lieu of equal treatment or value.

At the meeting on Wednesday, the FASB made several decisions, according to a summary. It was also decided to retain some guidelines with a clarification that will be considered according to the policies and financial policies of the main project. Having a tax refund does not automatically prevent an investor from using the leveraged method.

Some companies asked for a broader application when the FASB asked for accounting information last year, according to The Wall Street Journalincluding Allstate, which requested the ability to use the accounting method to install special tax credit programs of the state, and Bank of America, which requested the development of guidelines and models for other types of tax credits.

The situation will be effective for public companies for financial years starting from December 15, 2023, including temporary periods in those financial years, and for other types of organizations for financial years starting in December 15, 2024, includes temporary periods in those funds. year. FASB will also allow early adoption.

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