The International Accounting Standards Board (IASB) on Friday published for public comment an exposure draft, Deferred Tax: Recovery of Underlying Assets, that would amend one aspect of IAS 12, Income Taxes. The IASB said it is setting an exposure period of 60 days—shorter than its normal 120 days—because the amendments
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Tax accounting
The Proper Timing of Workers’ Compensation Deductions
For companies with more than a de minimis amount in their workers’ compensation reserve, it may be worthwhile to review the details underlying the reserve amount. The reason? These days a significant portion of a workers’ compensation reserve likely results from amounts due to medical service providers for treatment already
New Accounting Methods Subject to Automatic Change Procedures
The IRS has issued new guidance on automatic accounting method changes. Revenue Procedure 2009-39 provides certain additions, modifications and clarifications to Revenue Procedures 2008-52 and 97-27 (as modified, amplified and clarified by various other revenue procedures). Revenue Procedure 2008-52 provides procedures for taxpayers to obtain automatic consent for certain changes
Credit Card Fees Are OID
The Tax Court held that credit card “interchange” fees received by subsidiaries of credit card issuer Capital One resembled interest that increased or created original issue discount (OID) related to the company’s pool of credit card receivables. As OID, a daily amount was properly included in income over the life
IRS Modifies Automatic Accounting Method Change Procedures
The IRS on Thursday modified the procedures for obtaining automatic consent to change an accounting method. Revenue Procedure 2009-39 amplifies, modifies and clarifies various earlier pieces of guidance that had established the general procedures for taxpayers to secure advance IRS consent to an accounting method change. Last year, the IRS
Executive Compensation: What’s Reasonable?
When a corporate client seeks words of wisdom regarding tax planning, most CPAs go through the litany of suggestions related to acceleration of deductions and deferral of income. Yet one of the biggest and potentially most dangerous tax issues facing corporations is the compensation paid to the top executives and
Casting Doubt on the Accrual of Interest
Due to the recent turmoil in the credit markets, creditors and borrowers alike are evaluating the tax treatment of interest accruals related to troubled loans. Generally under Treas. Reg. § 1.446-2(a), interest is taken into account by a taxpayer according to the taxpayer’s regular method of accounting. Beyond the specific
Erroneous LIFO Methodology
A mistake made in a taxpayer’s last-in, first-out (LIFO) computation may repeat in later-year returns if staff preparing the computation take a “same as last year” approach. When the mistake ultimately is detected, there is a question of whether the mistake represents a method of accounting or an error. Huffman
IRS OKs Rolling Average
The IRS now considers a rolling-average method of inventory costing used for financial statements to be acceptable as well for income tax reporting, assuming the taxpayer satisfies one of two safe harbors. Additionally, the IRS furnishes automatic consent to change to a rolling-average method. Companies in various industries view the
The Death of LIFO?
Few differences between IFRS and U.S. GAAP loom larger than accounting for inventories, particularly the disallowance of the last-in, first-out (LIFO) method in IFRS. The proposed shift of U.S. public companies to IFRS could affect many companies currently using LIFO for both financial reporting and taxation. This is because the
Tax Treatment of Rebates May Be Clearing Up
EXECUTIVE SUMMARY The IRS has attempted for many years to categorize rebates as deductions rather than exclusions so that the restrictions of IRC § 162 can be applied. But the courts have allowed exclusion treatment for direct seller-to-buyer rebates. Though the IRS has had some success in the courts
Derivatives and Hedging: Accounting vs. Taxation
EXECUTIVE SUMMARY Hedge documentation is important in both financial reporting and income taxation.For financial accounting purposes, on the date of the hedge, an entity must identify the hedged item, the instrument used, the type of risk hedged, the means of assessing hedge effectiveness, and the risk management objective and strategy.
Full Charge On Alternators
The Tax Court required an auto parts remanufacturer to include in income charges it normally waived in exchange for used parts from its customers. In so ruling, the court underscored that where a taxpayer’s accounting method does not clearly reflect income, the government can require it to use a different
What’s in Their Wallet?
The Tax Court rejected an attempt by credit card issuer Capital One to retroactively defer its recognition of income from fees for late payments of card balances. Capital One sought to do so by taking advantage of a law change allowing such payments to be characterized as changes to original
LIFO Snafu Is Change in Method
The Sixth Circuit Court of Appeals recently upheld a Tax Court finding that the consistent omission of a step when computing inventory cost under the dollar-value LIFO method was a change in accounting method rather than a mathematical error. Thus a $1,754,293 cumulative difference between the correct valuation of
Reorganization Rules Proposed
The IRS issued proposed regulations to simplify and clarify rules governing accounting methods to be used after corporate reorganizations and tax-free liquidations under IRC section 381(a). The proposed amendments to Treas. Reg. §§ 1.381(c)(4)-1 and 1.381(c)(5)-1 are intended to provide greater consistency between the corresponding Code paragraphs. They provide that
New Accounting-Change Process Proposed
The IRS is requesting comments on a proposal to revamp how taxpayers may obtain the Service’s consent to change their method of accounting for tax purposes. Notice 2007-88 describes a “standard consent process” that would become the exclusive method not only for changes currently eligible for automatic consent but other
Avoiding FASB 123(R) Pitfalls
EXECUTIVE SUMMARY FASB Statement no. 123(R), Share-Based Payment, poses a potential dilemma for companies with net operating losses (NOLs) that award nonqualified stock options (NQSOs) as compensation. If a company’s allowable tax deduction for stock option compensation exceeds the related book expense, it can realize an
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Preparing clients for new provisions next tax season
As the 2025 filing season approaches, H.R. 1 introduces significant tax reforms that CPAs must be prepared to navigate. These legislative changes represent some of the most comprehensive tax updates in recent years, affecting both individual and corporate taxpayers. This report provides in-depth analysis and guidance on H.R. 1.
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