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On The Horizon: IRS updates sequestration publication

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On the Horizon newsletter Contents Current reporting issue: Impact of tax reform

Recent developments on sequestration of tax credit refunds

EITF meeting held on Jan. 17 IOSCO releases report on good practices for audit committees IASB

IFRIC update issued

Comment letter issued

Current reporting issue: Impact of tax reform Recent developments on sequestration of tax credit refunds On Jan. 14, the IRS updated its publication, Effect of Sequestration on the Alternative Minimum Tax Credit for Corporations, by removing the reference to refundable alternative minimum tax (AMT) credits as one of the credits subject to sequestration. The publication was further amended to state that refund payments and credit elect and refund offset transactions due to refundable minimum tax credits under Section 53(e) will not be subject to sequestration for taxable years beginning after Dec. 31, 2017.

As reported in the Jan. 10 On the Horizon, that publication, which the IRS released in March 2018 and updated in November 2018, states that under the Balanced Budget and Emergency Deficit Control Act of 1985, as amended, certain refund payments and elected credits are subject to sequestration based on the then applicable sequestration reduction rate. Then, in December 2018, the Office of Management and Budget (OMB), along with the Treasury, concluded that these refundable AMT credits are not subject to sequestration, though neither agency publicly issued a formal update to the publication at that time; however, as discussed above, the IRS has now publicly updated this conclusion.

In light of the guidance in the IRS’s publication as of November 2018, entities might have concluded that a portion of the deferred tax assets relating to refundable AMT credits was not realizable and therefore recorded valuation allowances in the financial statements for the most recent annual or interim reporting periods that ended prior to December 2018.

As a result of the IRS’s updates on Jan. 14, entities should re-evaluate the realizability of deferred tax assets for refundable AMT credits in any annual or interim financial statements that either have not yet been issued or are not yet available to be issued. While each entity should make a robust evaluation of all available positive and negative evidence supporting (or negating) the realizability of its deferred tax assets, we believe it would be appropriate to consider the IRS’s Jan. 14 revisions when making this evaluation. In other words, if a calendar-year entity determines that the December 2018 OMB conclusion is sufficient positive evidence to support the removal of a previously recognized valuation allowance related to sequestration of refundable AMT credits, it would remove this valuation allowance from its financial statements during the annual or interim period ended Dec. 31, 2018.

On the other hand, if an entity determines that sufficient positive evidence to support the removal of the valuation allowance was not available until the IRS’s Jan. 14 update, it would not remove the valuation allowance from its financial statements until the annual or interim period including that January date.

We would not object to either determination.

EITF meeting held on Jan. 17 The FASB’s Emerging Issues Task Force (EITF) met on Jan. 17 to discuss EITF Issue 18-B, “Improvements to Accounting for Episodic Television Series.” The Task Force reached a final consensus on the issue, which was included in the proposed ASU, Improvements to Accounting for Costs of Films and License Agreements for Program Materials (a consensus of the FASB Emerging Issues Task Force).

Refer to the Nov. 15 On the Horizon for additional information on the proposed ASU.

IOSCO releases report on good practices for audit committees The International Organization of Securities Commissions (IOSCO) published a report, IOSCO Report on Good Practices for Audit Committees in Supporting Audit Quality, to emphasize the importance of the audit committee’s role in audit quality and to help audit committees identify ways to promote and support audit quality. Some of the practices identified in the report include that audit committees.

  • Assess potential and continuing auditors and recommend their appointment
  • Set audit fees
  • Facilitate the audit process
  • Communicate with the auditor
  • Assess auditor independence and audit quality

IASB IFRIC update issued The IASB’s IFRS Interpretations Committee (IFRIC) has issued the January 2019 Update summarizing the decisions reached by the Committee during its January public meeting.

Decisions on an IFRIC Interpretation become final only after the Committee has formally voted on the Interpretation, which is then sent to the IASB for ratification.

Comment letter issued On Jan. 15, the firm issued a comment letter in response to the FASB’s proposed ASU, Leases (Topic 842): Codification Improvements for Lessors.



© 2019 Grant Thornton LLP, U.S. member firm of Grant Thornton International Ltd. All rights reserved. This Grant Thornton LLP On the Horizon provides information and comments on current accounting and SEC reporting issues and developments. It is not a comprehensive analysis of the subject matter covered and is not intended to provide accounting or other advice or guidance with respect to the matters addressed in this publication. All relevant facts and circumstances, including the pertinent authoritative literature, need to be considered to arrive at conclusions that comply with matters addressed in this publication. For additional information on topics covered in this publication, contact a Grant Thornton client-service partner.