U.S. Federal Tax Bill Signed into Law: Understanding the New Law’s Impact on 2017 Accounting and Financial Reporting

On December 22, the President signed the U.S. federal tax bill into law. Therefore, as you prepare your year-end financial statements, you must account for the new law’s impacts to net income in 2017.

Who’s Impacted by the New Law?

The new law significantly impacts corporate tax strategies and cash flows. It will also impact income tax accounting for corporations. Under U.S. GAAP, changes to tax law or tax rates are recognized on the date of enactment. In the U.S., that means the date the new law is signed by the President.

Since the President signed the bill before the end of 2017, the impacts of the new law, in particular, the lower tax rates and changes in taxation of foreign income, will need to be accounted for as changes to net income in 2017 for calendar year-end companies.

This means all deferred tax assets and liabilities will be remeasured, which, along with impacting the 2017 income tax provision, will affect the amounts disclosed in the financial statement footnotes.

Questions?

If you have questions about this article or recent changes resulting from tax reform, please visit our Tax Cuts and Jobs Act page, or contact Matt Medlin.

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