FASB Q&A supports use of SAB 118 by private companies, not-for-profits

By Ken Tysiac

Private companies and not-for-profits that elect to apply the guidance in a new SEC staff accounting bulletin should apply all relevant aspects of the bulletin in its entirety, FASB’s staff said Thursday in a Q&A posted on its website.

FASB’s board voted Wednesday to permit private companies and not-for-profits to apply SEC Staff Accounting Bulletin No. 118 (SAB 118). The bulletin permits preparers to report reasonable estimates for the tax effects of the new Tax Cuts and Jobs Act, P.L. 115-97, in their financial statements for the reporting period in which the law was enacted.

After the law was enacted on Dec. 22, the SEC issued SAB 118 to guide reporting entities that do not have the necessary information to complete the accounting under FASB Accounting Standards Codification (ASC) Topic 740, Income Taxes.

Private companies and not-for-profits are not required to apply SEC staff accounting bulletins, but many have elected to apply the bulletins in the past.

Should private companies and not-for-profits choose to apply SAB 118, they should apply all relevant aspects of the bulletin, according to FASB staff. This would include the disclosures listed in SAB 118.

In addition, FASB’s staff said these private companies and not-for-profits should disclose their accounting policy of applying SAB 118 in accordance with ASC Paragraphs 235-10-50-1 through 235-10-50-3.

Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com) is a JofA editorial director.

SPONSORED REPORT

6 key areas of change for accountants and auditors

New accounting standards on revenue recognition, leases, and credit losses present implementation challenges. This independently-written report identifies the hurdles that accounting professionals face and provides tips for overcoming the challenges.

PODCAST

How tax reform will impact individual taxpayers

Amy Wang, a CPA who is a senior technical manager for tax advocacy at the AICPA, answers to some of the most common questions on how the new tax reform law will impact individual taxpayers.