End of SEC Tax Reform Grace Period Could Increase Disclosures

October 3, 2018

Last December after the Tax Cuts and Jobs Act (“TCJA”) was signed into law, the Securities and Exchange Commission (“SEC”) issued interpretative guidance that allows companies to use good faith estimates to adapt to the income tax effects. With the guidance expiring soon, the agency is advising businesses to apply the income tax disclosure requirements under U.S. GAAP once the grace period ends.

SEC Staff Accounting Bulletin (“SAB”) No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act, allows businesses to use reasonable estimates and provisional amounts to calculate the new tax law’s impact. SAB No. 118 also includes a grace period that lets businesses estimate the impact of the TCJA when fulfilling the disclosure requirements under Financial Accounting Standards Board (“FASB”) ASC 740, Income Taxes, in regulatory filings. The grace period ends December 22, the anniversary of the tax law’s enactment.

At a recent FASB Financial Accounting Standards Advisory Council meeting, SEC deputy chief accountant Sagar Teotia was asked if there were any requests for the deferral to be extended past what SAB No. 118 outlines. Teotia answered no.