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Accounting & Tax UpdateFEI NE Wisconsin Chapter
November 16, 2009
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Agenda• SFAS No. 141R - Business Combinations• New and Proposed Tax Changes• FIN 48 – Accounting for Uncertainty in Income
Taxes• Roth Conversions• Alternative Minimum Tax Planning• SFAS No. 157 - Fair Value Measurements &
Disclosures• Gifting Opportunities• IRS & Wisconsin Audit Update• Other Accounting Updates• Other Tax Updates
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Presenters
• Christopher J. Handrick, CPA Audit Shareholder, Schenck SC– 920-455-4203– [email protected]
• James A. Olson, CPATax Shareholder, Schenck SC– 920-455-4160– [email protected]
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Presenters
• Christopher J. Handrick, CPA Audit Shareholder, Schenck SC– 920-455-4203– [email protected]
• James A. Olson, CPATax Shareholder, Schenck SC– 920-455-4160– [email protected]
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SFAS No. 141R -Business Combinations
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Effective Date
• Fiscal years beginning after December 15, 2008 (i.e. 1/1/09 for calendar-year companies)– Acquisition date on or after– Early adoption prohibited
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Overview
• SFAS 141R requires measuring and recognizing the business acquired at full acquisition date fair value
• Highlights of changes from previous guidance follows.
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Direct External Acquisition Costs
• Old: Added to purchase price
• New: Expensed as incurred– Exception: Cost associated with issuing debt or securities
are still accounted for in accordance with applicable GAAP rules
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Recording of an Acquisition
• Old: Cost accumulation approach– Cost is allocated to acquired assets and assumed liabilities
at estimated fair values with numerous exceptions, excess is goodwill.
• New: Total value of the acquiree is the acquisition date fair value of (generally):– Consideration transferred– Any entity interest held in the acquiree by the acquirer
immediately before the acquisition date (step acquisition)– Non-controlling interest in the acquiree recognized at fair
value
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Contingent Consideration
• Old: Not recorded until earned and recognized as additional purchase price.
• New: Recorded at its fair value at acquisition date– Subsequent adjustments of contingent consideration
classified as a liability recognized through earnings
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Bargain Purchases
• Old: Negative goodwill allocated as prorata reduction to other fair value adjustments (i.e. intangibles or fixed assets), any excess to income statements as extraordinary item.
• New: Recognized by acquirer as a gain (not extraordinary) on income statement at date of acquisition.
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Restructuring Activities
• Old: Restructuring plans of acquirer related to “target,” generally incorporated into purchase accounting.
• New: Acquirer’s restructuring plan accounted for separate from business combination accounting.
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Purchase Price Allocation Uncertainties
• Old: Generally one-year period from acquisition date to make adjustments.
• New: Provisional accounting created at acquisition date and disclosed. – Revisions of initial estimates require retrospective
application.
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Income Tax Accounting Changes
• Old: Decreases in acquirer’s valuation allowance part of purchase accounting
• New: Changes in valuation allowance generally reflected in the income statement.
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Income Tax Accounting Changes
• Old: Subsequent changes to valuation allowance related to target recorded at acquisition would first reduce goodwill to zero, then other intangibles, finally income tax expense.
• New: For changes not considered measurement period adjustments, change would generally be reflected in income statement.
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Tax ChangesNew & Proposed
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The Worker, Homeownership, and Business Assistance
Act of 2009
• Signed into law on November 6, 2009• Expanded ability to carry back NOL’s• Expanded credits for purchase of new homes
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NOL Carrybacks
• For “eligible small businesses” (under $15 million gross receipts), the ability to carry back losses 3, 4 or 5 years is extended to 2009 tax years also
• For larger companies, the longer carry back periods are available for 2008 OR 2009, but not both
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NOL Carrybacks
• For large and small companies, carry backs to the 5th prior year are limited to 50% of the income in the carry back year, the balance rolling to the 4th prior in full, and so on. However, this limitation does not apply to 2008 NOL’s for eligible small businesses
• The 90% income limitation on the use of NOL’s for AMT purposes is suspended for an extended carry back year
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First Time Homebuyer Credit
• The November 30, 2009 expiration is extended to April 30, 2010
• If a binding contract to close is done by April 30, closing can take place up to June 30, 2010 and still be eligible for the credit
• For purchases in 2010, an election can be made to claim the credit on the 2009 return (similar to the current rule)
• AGI phase out raised to $125K single and $225K joint
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First Time Homebuyer Credit
• Effective November 6, 2009 purchase price of residence cannot exceed $800,000
• Effective November 6, 2009 the credit is expanded to “long time residents of the same principal residence”– Owned or used the same principal residence for any 5
consecutive years of the past 8– Maximum credit is $6,500, vs. the $8,000 for first time
buyers
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Proposed Tax Increases
• Automatic Restoration of 2001 tax rates in 2011
Present Rates 2011 Rates
10% -
15% 15%
25% 28%
28% 31%
33% 36%
35% 39.6%
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Proposed Tax Increases
• Capital Gain and Qualified Dividend rates automatically restored to 2001
Present Rates 2011 Rates
Cap Gains
0% 10%
15% 20%
Qualified Dividends
0% ordinary
15% income rates
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Proposed Tax Increases
• The Obama Administration has proposed extending the 0% and 15% rates for dividends and capital gains for taxpayers with income up to $250K joint or $200K single.
• For taxpayers above these limits, the capital gain rate would go back to 20%, and dividends would be taxed at the same rate, under the proposal.
• STAY TUNED!!!
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Proposed Tax Increases
• Strategies in anticipation of higher rates– Defer capital losses– Extract excess liquidity via dividends or partial redemptions
of stock– Accelerate installment sale gains
• elect out of installment reporting in ‘09 and ‘10
• “dispose” of pre-’09 installment contracts
• create new installment sales and lock in the current low interest rates
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FIN 48Accounting for Uncertainty in Income Taxes
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Overview
• Effective for private companies & NFPs fiscal years beginning after 12/15/08 (originally 12/15/06 but the FASB delayed implementation for private companies via FASB Staff Position No. FIN 48-3)
• Applies to all entities that prepare GAAP financials (i.e., C-corps, pass-through entities, NFPs, etc.) including all subsidiaries in consolidation. OCBOA f/s are not GAAP (i.e., cash basis, income tax basis, modified cash, etc.).
• Further interpretation of SFAS No. 109 (effective since 1992)
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Overview
• Most tax positions are not “controversial”…but tax law is subject to varied interpretation and whether that tax position will be sustained can be uncertain
• FAS 109 didn’t contain guidance on how to address “uncertainty” in income taxes
• FIN 48 requires a detailed review, documentation and recording of any potential income tax exposures from tax positions related to all open tax years
• Private companies generally will have fewer number of uncertain tax positions than public companies due to size and volume of transactions.
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Overview
• Income tax only…taxes such as payroll, sales, use & property are not covered
• Materiality is used…which is a matter of professional judgment
• 1st year will be toughest/most time consuming…update thereafter
• Primarily a documentation “exercise”
• Topic 740 income taxes in ASC
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Potential exposure under FIN 48:
• State nexus positions
• Transfer pricing (international operations). Little or no support
• Travel and entertainment
• Inventory
• BIG (Built-In Gains) Tax – transaction recognized that will trigger tax
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FIN 48 Possible Applications to Flow-Thru’s and Nonprofits
S Corporations
• S Corp election validation
• Any violation of S Corp status
• Ineligible shareholder
• Second class of stock
• Passive income test
• Built-in-gains taxes
• Entity level state income taxes (generally Texas and Michigan)
• Likely individual
Partnerships/LLC’s
• Entity level state income taxes (generally Texas and Michigan)
Nonprofits
• Exempt application validation
• Any violations of exempt status?
• Any unrelated business taxable income?
• If have UBTI, are expense allocations correct?
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Mechanics of FIN 48
• Step 1: Establish Materiality Level
• Step 2: Identify any Tax Positions
• Step 3: Determine Optimal/Appropriate Unit of Account for each Tax Position
• Step 4: Apply the “More–Likely–Than–Not” Test to each Tax Position
• Step 5: Measure the Recognized Tax Benefit for each Uncertain Tax Position
• Step 6: Calculate the FIN 48 Liability
• Step 7: Record and Disclose the FIN 48 Liabilities
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Step 1: Establish Materiality Level
• Specific to each company
• Consult with auditors’ materiality thresholds
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Step 2 : Identify any Tax Positions
• A tax position refers to a position in a tax return or future return if affecting realizability of current or deferred tax asset liability.
• A tax position includes a permanent or deferred reduction in income taxes.
• A tax position includes a change in the realizability of a deferred tax asset.
– Also includes:• Decision not to file an income tax return
• Allocation or shift of income between jurisdictions (i.e. states, countries)
• Characterization of income (i.e. ordinary income to capital gain)
• Entity status
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Step 3: Determine Optimal/Appropriate Unit of Account for each Tax Position
• Matter of judgment based on the individual facts and circumstances of that position– Examples
• R&D credits– Project by project basis, versus functional expenditures (wages,
department, materials, etc.)
• T&E expenses– Group into officer and non-officer groups, or all T&E as one group
• Transfer pricing– By transaction, product line, country, etc.
• Must consider how company prepares and supports its income tax return, and manner in which tax authorities would examine the issue.
• Should be consistently applied, but can change if supportable.
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Step 4: Apply the “More–Likely–Than–Not” Test
to each Tax Position• The tax benefits of a tax position may be recognized only if
it is “more–likely–than–not” that the tax position would be sustained upon examination.
• It is presumed that the tax return will be examined, and the tax authority has full knowledge of all the relevant information.
• Prior tax audits of the company should be considered
• No offset of tax position’s against each other
• If a tax position does not meet the “more–likely–than–not” threshold, then zero recognition of the tax position in the financial statements.
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Step 4: Apply the “More–Likely–Than–Not” Test
to each Tax Position cont.• If the tax position meets the “more–likely–than–not”
threshold, then the recognized tax benefit must be measured.
• If do not meet the “more–likely–than–not” threshold for the period the tax position is taken, a company shall recognize the benefit in the first period that meets any one of the following 3 conditions:
– The “more–likely–than–not” threshold is met by the reporting date,
– The tax matter is settled, or
– The statute of limitations has expired
• Subsequent changes of judgment resulting from new information may lead to changes in recognition.
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Step 5: Measure the Recognized Tax Benefit for each Uncertain
Tax Position• Only need to measure if the tax position meets the
“more–likely–than–not” threshold, and only if less than 100% certain of tax position (an “uncertain tax position”, or “UTP”)
• Probable outcomes measurement – Purpose is to estimate the largest amount of benefit that is
greater than 50% likely of being realized upon settlement.
• This measured amount of tax benefit is recognized in the financial statements
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Step 5: Measure the Recognized Tax Benefit for each Uncertain
Tax Position cont.• Example
Because $60 is the largest amount of benefit that is greater than 50%
likely of being realized upon settlement, the company would
recognize a tax benefit of $60 in the financial statement.
• May consider recent tax audit results.
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Step 6: Calculate the FIN 48 Liability
• Liability includes tax, interest and penalties
• Applied to unrecognized portion of UTP
• Record as a current or noncurrent liability (based
on management’s assessment)
• Reduce the deferred tax asset or increase
deferred tax liability if applicable
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Step 7: Record and Disclose the FIN 48 Liabilities
• Footnote in Financial Statement
• Disclose FIN 48 tax interest and penalties
recognized in financial statements
• Disclose any significant changes to unrecognized
tax benefits expected within 12 months
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Getting Started
• Begin now!
• Examples:– Entity status– State Nexus– Transfer pricing
• Meet with auditors to identify potential tax issues
• First year requires a review of all open tax years
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Roth Conversions
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Roth IRA Conversion
• General Rules– Convert all or part of traditional IRA to Roth IRA– Pay the tax on the amount converted, typically from funds
outside the IRA– Thereafter, obtain benefits of Roth IRA:
• No RMD’s at age 70 ½
• Non-taxable withdrawals
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Roth IRA Conversion
• 2010 Opportunity– The $100,000 AGI limit is repealed, now anyone can convert
to a Roth– The tax due on the conversion can be deferred to 2011 and
2012
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Roth IRA Conversion
• What should I do??– Current v. Future tax brackets?– When will I need the money?– How much will I need in retirement?– Do I have outside funds to pay the tax?– What are my estate planning objectives?– What is Wisconsin going to do?– Run the numbers!!!
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Alternative Minimum Tax Planning
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Alternative Minimum Tax
Similar to a flat tax, with only a few deductions allowed
• Many normal write-offs not allowed –– Personal exemptions– Standard deduction– State and local taxes– Unreimbursed business expenses
• 2 Rates apply - – 26% on the first $175K of AMT income– 28% thereafter
• Pay the greater of the 2 taxes calculated
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Alternative Minimum Tax
• Individuals (and Businesses) – depending on your AMT exposure– Payment of state income taxes & local property taxes– Spread out capital gains or move capital gains to a
potentially non-AMT tax year– Sell capital loss assets to offset capital gains causing AMT– Exercise of Incentive Stock Options– Postpone charitable contributions– Use any AMT credits, if applicable
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Alternative Minimum Tax
• Personal Credits that offset AMT– child and dependent care credit – credit for the elderly and disabled – adoption expense credit – child tax credit – mortgage credit certificate [MCC] credit– American Opportunity credit and the Lifetime Learning credit– saver's credit– non-business energy property credit – residential energy efficient property credit – credit for hybrid vehicles
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SFAS No. 157 -Fair Value Measurements & Disclosures
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Effective Dates
• Fiscal years beginning after November 15, 2007 (i.e. 12/31/08 year ends):– FINANCIAL assets and liabilities which are recognized or
disclosed at fair value– NONFINANCIAL A/L measured at Fair Market Value (FMV)
on a recurring basis
• Fiscal years beginning after November 15, 2008 (i.e. 12/31/09 year ends) for NONFINANCIAL assets and liabilities which are recognized or disclosed at fair value on a non-recurring basis.
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Summary
• Consolidated current information related to this Statement is now contained in ASC Topic 820.
• This statement applies to assets and liabilities that are measured on the balance sheet at FMV.
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Summary
• It does not:
– Stipulate what should be reported at FMV or when.
– Change the way most of the assets/liabilities that have historically been valued at fair value will be valued going forward.
• For some of the more complicated valuation scenarios, such as hard to value assets and liabilities, there is new guidance within SFAS 157 (now ASC 820) that should be consulted.
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Summary
• The Statement does:
– Clarify the definition of fair value and establish a framework for measuring fair value
– Expand the disclosures related to fair value measurements.
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Hierarchy
• SFAS No. 157 specifies a hierarchy of valuation techniques based on whether the inputs to those valuation techniques are observable or unobservable.
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Hierarchy
• Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Company’s market assumptions. The fair value hierarchy specified by SFAS No. 157 is as follows:
• Level 1 - Quoted prices in active markets for identical assets and liabilities.
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Hierarchy
• Level 2 - Quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active or other inputs that are observable or can be corroborated by observable market data.
• Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
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Financial Assets & Liability
• The definition of financial asset is:– Cash, evidence of ownership interest in an entity, or a
contract that conveys to one entity a right to do either of the following:
• Receive cash or another financial instrument from a second entity
• Exchange other financial instruments on potentially favorable terms with the second entity
• Examples of financial assets which could be reported at FMV: – equity and debt investments– certain derivatives (such as commodity futures contracts )
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Financial Assets & Liability
• The definition of a financial liability is:– A contract that imposes on one entity an obligation to do
either of the following: • Deliver cash or another financial instrument to a second entity,
• Exchange other financial instruments on potentially unfavorable terms with the second entity
• Examples of financial liability which could be reported at FMV: – certain derivatives (such as interest rate swap contracts)
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Financial Assets & Liability
• Recall that an entity which is either a public company, has assets over $100M at the date of the financial statements, OR has derivatives is required to follow the disclosure guidance under what is now ASC825. – This requires the disclosure of the FMV of ALL financial
instruments (it does not require that they be adjusted to FMV.)
– Typical financial instruments which are not recorded at FMV include notes payable. ASU 2009-05 was issued to help determine the FMV of certain liabilities, including notes payable.
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Nonfinancial Assets and Liabilities
• All other assets and liabilities are considered “nonfinancial.”
• Although inventory is often reported at LCM, SFAS157, 3b, specifically excludes inventory from this statement.
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Nonfinancial Assets and Liabilities
• Most nonfinancial assets and liabilities are considered nonrecurring as far as fair value measurements.
• Nonrecurring means that you will continue to account for an asset using traditional GAAP (i.e. depreciate PP&E, amortize intangibles other than GW, etc.) until such time that you deem the asset to be impaired (FMV is below book value).
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Nonfinancial Assets and Liabilities
• Examples of non-financial assets which could be reported at FMV: – items acquired in a business combination; assets for which
an “impairment assessment” is performed, such as:• goodwill
• other indefinite-lived intangible assets
• long-lived assets such as property and equipment (either held and used or held for sale)
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Disclosures
• For Assets/Liabilities measured at FMV, required to disclose for each period presented:– The fair value measurements at the reporting date– The level within the fair value hierarchy in which the fair
value measurements fall, segregated between Level 1, Level 2 and Level 3.
– The valuation techniques used to measure fair value and a discussion of the changes, if any, in the valuation techniques, if any, during the period
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Disclosures
• For recurring measurements of assets or liabilities that are measured at fair value in a given period, the reporting entity must disclose for Level 3 measurements, – a rollforward presenting changes during the period
attributable to G/L– purchases, sales, issuance, settlements– transfers in and out of Level 3.
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Disclosures
• For nonrecurring measurements of nonfinancial assets or liabilities that are measured at fair value in a given period, the reporting entity must disclose for Level 3 measurements, a description of the inputs and the information used to develop the inputs
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Gifting Opportunities
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Gifting
• Annual Exclusion for 2009 and 2010 is $13,000 per person
• Due to the economic downturn, values are probably at historic lows now
• Gift the future appreciation now, to maximize the annual exclusion
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IRS & Wisconsin Audit Update
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IRS Audit Update
• Personal use of cell phones• Passive losses/material participation• S-Corp reasonable compensation• 2010 employment tax audits• Other issues??
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Wisconsin Audit Update
• Transportation company compliance• Sales/Use tax compliance • Other issues??
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Other Accounting Items
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IFRSInternational Financial Reporting Standards
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IFRSInternational Financial Reporting Standards
• Goal: To make financial reporting the same world wide
• Who’s Effected: All public and private companies
• When: World wide by 2011, EXCEPT for U.S.– 2014 is projected compliance date for large accelerated
filers– 2015 for accelerated filers– 2016 for non-accelerated filers– private companies TBD
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IFRSInternational Financial Reporting Standards
• Main difference is IFRS is “principles” based vs. US GAAP is “rules” based
• Several accounting differences are identified
• Many multinational companies are dealing with 3+ sets of accounting guidelines
– US GAAP– IFRS– Local Country GAAP
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IFRS Transition
• Ongoing convergence project will reduce the number of US GAAP vs. IFRS differences
• Many new accounting pronouncements relate to convergence
• Be aware of differences between IFRS, US GAAP and local country GAAP
• Keep abreast of potential adoption dates
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IFRSInternational Financial Reporting Standards
• How is IFRS different from US GAAP?– Good news: More similarities than differences between IFRS
and US GAAP. – If you place US GAAP rules side-by-side with IFRS rules,
the result is 9 inches of pages of US GAAP versus 2 inches under IFRS.
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IFRSInternational Financial Reporting Standards
• Some of the “highlights” of IFRS are as follows:– Property, plant and equipment – under IFRS, you have the
option to report your fixed assets at fair value– Inventory – LIFO (last-in, first-out) costing is prohibited
under IFRS, which also creates tax implications. The IRS has a conformance rule stating that a taxpayer cannot use LIFO for tax unless it also uses LIFO for financial reporting.
– Leases – under IFRS, there are no “bright line” rules in classifying leases as operating or capital, such as the 90% or 75% rules.
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IFRSInternational Financial Reporting Standards
• Some of the “highlights” of IFRS are as follows (cont.):– Business combinations – unlike US GAAP, IFRS doesn’t
have special treatment for combinations under common control.
– Revenue recognition – IFRS guidance regarding revenue recognition is less extensive than US GAAP.
– Debt violations – IFRS doesn’t permit curing debt violations after year-end.
– Long-term construction contracts – IFRS does not permit completed contract method
– Impairment – IFRS uses single step method vs. two-step method for U.S. GAAP, likely generating more impairment write-down
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Accounting Standards Codification
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Overview
• Single source of authoritative nongovernmental U.S. GAAP
• All other literature not included in Codification is non-authoritative
• Effective for periods ending after September 15, 2009
• Result of a 5 year project which simplifies organization of U.S. GAAP (formerly APB, FASB, SOP, EITF, FIN, FSP, etc.) into one searchable database
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Overview
• Eliminates redundant content
• No longer appropriate to refer to FASB Statement No. 13, Accounting for Leases in footnotes (which is now Codification Topic 840 Leases)
• Doesn’t change US GAAP
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Structure
• Organized into about 90 accounting topics
• Consistent structure of XXX-YY-ZZ-PP– XXX is the Topic– YY is the Subtopic– ZZ is the Section– PP is the Paragraph
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Accounting Standards Codification – Updates
• Results of on-going standard-setting activity will be an Accounting Standard Update
• Title will be Accounting Standard Update YYYY-XXX– YYYY is year issued– XXX sequential number for each update
• Serves to provide background information about the issue, update the Codification and provide the basis for conclusions on changes in the Codification
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Accounting Standards Codification – Updates
• When the newly amended information is fully effective, the outdated guidance will be removed from the Codification
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Accounting Standards Codification
• Basic access is available for free at the FASB web-site. www.fasb.org
– Professional view ($850) has more “bells and whistles”
– Recommend viewing free on-line tutorial (10 to 15 minutes)
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Slide #88
Slide #87
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SFAS No. 167 -Accounting for Variable Interest Entities
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Effective Date
• Effective for interim or annual financial periods beginning after November 15, 2009 (in other words, for November 30, 2010 and subsequent year ends) – Early implementation is prohibited– Potential 1-year deferral being discussed
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Summary
• This statement:
– Amends FASB Interpretation No. 46(R) – Consolidation of Variable Interest Entities to:
• Require an enterprise to perform a QUALITATIVE analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity (VIE)
– The previously-utilized FIN 46R QUANTITATIVE evaluation of affiliated entities has been eliminated. The qualitative approach will result in more affiliated entities being identified as VIEs, along with more reporting entities being identified as primary beneficiaries.
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Summary
• This statement: – End result: more affiliated entities will be deemed to be VIEs
that need to be consolidated in the financial statements of reporting entities that are deemed to be primary beneficiaries
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Summary
• This statement:
– Identifies the primary beneficiary of a VIE as the enterprise that has the following characteristic:
• The obligation to absorb losses or the right to receive benefits from the VIE that could potentially be significant to the VIE
• (par 16) “For purposes of determining whether it is the primary beneficiary of a VIE, an enterprise with a variable interest shall treat variable interests in that same entity held by its related parties as its own interests.
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Summary
• This statement:
– Changes how an enterprise determines when an entity that is insufficiently capitalized or is not controlled through voting or similar rights should be consolidated.
– Requires additional disclosures related to the enterprise’s involvement in a VIE
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SFAS No. 165 -Subsequent Events
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Effective Date
• Effective for interim or annual financial periods ending after June 15, 2009 (in other words, June 30, 2009 and subsequent year-ends)
• Previous accounting guidance was in SAS No. 1/AU section 560. Moves the guidance into the “accounting” literature, so it can be included in the FASB Codification (ASC.)
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Overview
1. Requires a disclosure of the date through which management has evaluated transactions for subsequent events
2. It does not impact the accounting for subsequent events – it simply changes the wording.
– Application – this disclosure is to be included in ALL full-disclosure financial statements (audits, reviews, and compilations.)
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Summary
• A subsequent event is an event or transaction that occurs after the balance sheet date but before the financial statements are issued or available to be issued.
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Summary
• There are still two types of subsequent events (but with different names):1. Recognized subsequent events (previously called “Type I”
subsequent event)• Events or transactions that provide additional evidence about
conditions that existed at the balance sheet date, including estimates inherent in the process of preparing financial statements
• These events should be considered when determining amounts recognized in the financial statements as of the balance sheet date
– Example: Settlement of litigation (the events of which took place prior to the balance sheet date) after the balance sheet date but before the financial statements are issued or available to be issued, for an amount different than the liability already recorded on the books as of the balance sheet date
103
Summary
• There are still two types of subsequent events (but with different names):2. Nonrecognized subsequent events (previously called
“Type II” subsequent events)• Events that provide evidence about conditions that did not exist
at the balance sheet date, but arose after that date.
• These events are not recognized in the financial statements– Example: business combination that occurred after the balance
sheet date.
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Summary
• Two different evaluation periods:– Public Companies
• Through the date of issuance of the financial statements
– Private Companies• When the financial statements are available to be issued
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Summary
• New disclosure requirement:– Required to disclose the date through which management
evaluated subsequent events, along with the basis for that date being the appropriate date (i.e. the date financial statements were issued or available to be issued)
– Example disclosure:• The company has evaluated events and transactions for
potential recognition or disclosure in the financial statements through (DATE), the date which the financial statements were available to be issued.
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Other Tax Updates
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Other Items
• Basis on sale of life insurance stock – IRS loses• Business “investigation” v. Business
“expansion”• S Corporation debt – do it right to get basis to
deduct losses• Employer-owned life insurance, get the consent
of the employee up front• Personal goodwill still gets favorable tax
treatment
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Questions??
Thank You!
