By Jen Stretch, CPA – Manager, Compliance Services at Certent
As you probably know, in December of 2017 congress passed the United States Tax Cuts and Jobs Act (TCJA). Among other changes, the main provisions that affected corporations include a reduction of the statutory tax rate from 35% to 21%, elimination of corporate alternative minimum tax (AMT), and redesigns the system for taxation of foreign earnings. These changes became effective January 1, 2018, so companies are busy trying to determine the effects on their financial statements. Concurrent with the approval of the TCJA, the SEC issued related Staff Accounting Bulletin 118 (SAB), and in February of this year the Financial Accounting Standards Board (FASB) released Accounting Standards Update 2018-02, both of which provide guidance on specific disclosures related to the TCJA.
These changes have begun to appear in filings as numeric amounts, so as companies prepare to file there will likely be some new values to tag in the financial statements and footnotes of their 10-K and 10-Q filings. There are some existing US GAAP elements that will be useful for tagging these new values, and FASB has established new elements related to ASU 2018-02 as well. Typically, proposed taxonomy changes associated with ASUs aren’t seen until the standard annual taxonomy update process takes place, but recently FASB has been releasing proposed taxonomy changes concurrently with the release of ASU exposure drafts. On the FASB Taxonomy (XBRL) page, the Taxonomy Improvements page will direct you to changes listed by ASU, which include either release notes or listed changes that were made directly to the development taxonomy. The changes related to both SAB 118 and ASU 2018-02 were included in the release notes for ASU 2018-02. These release notes provide a list of new elements, which will be available in the 2019 taxonomy, and provide specific tagging examples for implementation of the new elements.
The 50 new elements, mostly labeled with “Tax Cuts and Jobs Act of 2017” (TCJA), are mainly monetary type elements but also include a handful of other element types. These include elements that are new concepts, such as “Tax Cuts and Jobs Act, Incomplete Accounting, Change in Tax Rate, Provisional Income Tax Expense (Benefit)”, and those that would replace existing US GAAP elements as the more specific choice when the 2019 taxonomy is approved by the SEC (e.g., in the effective income tax rate reconciliation). The second part of the release notes use these new elements to provide specific tagging examples for disclosures related to the TCJA. These disclosure examples include the equity statement, disclosure of changes in accumulated other comprehensive income, and incomplete/complete accounting disclosures related to the act and related SEC and FASB guidance.
FASB tagging recommendations disclose the intended purpose for US GAAP elements, which promote consistency and comparability of public company data and comply with SEC rules, so it’s important to reference them, when available, for XBRL tagging purposes. Some of the common disclosures resulting from the act, though, may not be addressed in a FASB tagging guide, so following are some examples of common disclosures related to the TCJA for which US GAAP elements exist and our recommendations for tagging them.
Many companies have specifically stated the new corporate tax rate of 21% in their filings. Not all companies have chosen to tag this value, however, since this is a rate that is standard for all companies in United States. At Certent, our recommendation is to tag this value – and here’s why. Rule 6.6.22 of the EDGAR Filer’s Manual states that each monetary value, percentage and number in the footnotes must be tagged, and while there are exceptions to this rule listed in SEC Compliance and Disclosure Interpretations (146.16) and XBRL US Best Practice 1.1.13, this concept is not one of them. Should your company choose to tag this value, below is our recommendation.
Effective Income Tax Rate Reconciliation, at Federal
Statutory Income Tax Rate, Percent
Scenario, Plan [Member]
01/01/2018 – 12/31/2018
If enough calculations have been completed and there has been an adjustment to deferred tax assets/liabilities, the impact on income tax expense benefit will be disclosed. See our example from AT&T’s 2017 10-K below.
Income Tax Expense (Benefit), Continuing Operations,
Adjustment of Deferred Tax (Asset) Liability
01/01/2017 – 12/31/2017
If a filing discloses an effective income tax rate reconciliation, there will more than likely be a line related to the TCJA. The current US GAAP taxonomy provides monetary and percent type elements for this concept.
2017 US GAAP Taxonomy
To ensure you always have the latest information related to the FASB taxonomy work, be sure to sign up for updates direct from the FASB. The FASB Taxonomy page also provides additional tagging and XBRL resources for you and your team. For details on how Certent can streamline your external reporting process, request a demo today.