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Tax & Accounting Update

Tax & Accounting Update is provided by Thomson Reuters and based on material published on Checkpoint, its online news and research platform. The Update is a quick-reference guide to the most pressing issues coming down the regulatory and administrative pipeline. Visit https://tax.thomsonreuters.com/checkpoint-news/ for further information and daily updates.

Tax News

IRS's private debt collection program begins.

In April, the IRS began sending letters to notify “a relatively small group of individuals” with overdue federal tax that, per legislation enacted in 2014, their accounts have been assigned to one of four private collection agencies (PCA). The PCAs are authorized to discuss payment options, including setting up payment agreements with taxpayers. As with cases assigned to IRS employees, however, any tax payment must be made to the IRS. Taxpayers are cautioned never to send a payment to the PCA or anyone besides IRS or the U.S. Treasury. The IRS also tells taxpayers that PCAs are not authorized to take enforcement actions against taxpayers. Only IRS employees can take these actions, such as filing a notice of federal tax lien or issuing a levy.

FASB News

Implementation of revenue standard to impose “tremendous” costs.

During a meeting with FASB's Financial Accounting Standards Advisory Council (FASAC), board member Lawrence Smith raised concerns about the landmark revenue recognition standard, which goes into effect for public companies next year. Smith voted for the standard, but now he is concerned that the implementation process will require “tremendous” costs, even for the industries for which the accounting change will be relatively modest. “For those companies where transactions are effectively going to be reported in the same way that they were previously, I kind of scratch my head and now and say, ‘Gee, was that cost really all that worth it?’” Smith said. As he now sees it, FASB may have better served investors and other constituents if it had explored targeted improvements to its existing revenue guidance and not rewritten the standards completely. Public companies must comply with the new revenue guidance in 2018. It is expected to create major accounting changes in the software and telecommunications industries, but in some other sectors, such as retail, the change is not expected to be as dramatic.

The U.K. has formally started the process to leave the European Union, raising questions about IFRS adoption in a major international market.

Hedge accounting amendments slated for third-quarter release date.

FASB is prepared to release a final set of amendments to its hedge accounting standard this summer. The accounting board initiated the project to improve the alignment of hedge accounting and risk management activities by taking away some of the restrictions that made hedge accounting too difficult to apply for many businesses. The board's research staff expects to draft the final version of the amendments and bring them to the board in May for a last round of debate. Chairman Russell Golden said he expects FASB's staff to begin entering the necessary editorial changes into the Accounting Standards Codification in late June.

Next steps on insurance, disclosures to wait until July.

FASB does not plan to take formal action on its plan to make accounting for insurance companies more transparent or on its effort to overhaul financial statement disclosures until at least July, FASB Chairman Russell Golden announced. Speaking at a meeting of the FASAC, Golden said the board wanted to wait until its incoming member, Marsha Hunt, took her seat on July 1. Golden said he expected FASB to hold educational sessions on the two topics in May.

IASB News

U.K. faces IFRS questions in wake of Brexit.

The United Kingdom has formally started the process to leave the European Union, raising questions about what happens to IFRS adoption in a major international market. Currently, listed companies in the U.K. are required to prepare financial statements under IFRS as adopted by the EU, and the U.K.'s Financial Reporting Council expects the exit from the EU to have “significant” implications on IFRS—but it is unclear at this stage what that means. “All of our outreach that we've done to date confirms that the vast majority of people would like there to be some form of IFRS-based accounting framework for the U.K. post-Brexit,” said Paul George, the Financial Reporting Council's executive director for corporate governance and reporting. Additionally, the U.K. is an influential voice on the European Financial Reporting Advisory Group, which advises the European Commission on accounting issues and is authorized to approve individual IASB standards for use in the EU. The U.K.'s role in that group, however, is also now uncertain.

 
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