Accounting and Reporting Implications of the New Tax Law

On Jan. 18, 2018, the Federal Reserve Board, Federal Deposit Insurance Corporation and the Office of the Comptroller of the Currency issued an Interagency Statement (the Statement) in response to the Tax Cuts and Jobs Act, P.L. 115-97, (the Tax Act). The Financial Accounting Standards Board Accounting Standards Codification Topic 740-10-25-47 requires that “the effect of a change in tax laws or rates shall be recognized at the date of enactment.”

The Tax Act was enacted on Dec. 22, 2017, and effective for tax years beginning on or after Jan. 1, 2018. These guidelines are applicable to Dec. 31, 2017 regulatory reports and financial statements. The eligibility requirements vary between the agencies; therefore, it is important to reference the Statement from your institution’s regulator.

The Statement does not represent new rules or regulations but instead explains:

  • Changes in deferred tax assets and deferred tax liabilities resulting from the lower corporate income tax rate, and other applicable provisions of the new tax law, should be reflected in an institution’s income tax expense in the period of enactment.
  • How to resolve the disproportionate tax effects in accumulated other comprehensive income as a result of the re-measurement of deferred tax assets and liabilities by allowing the early adoption of the concepts in the FASB’s exposure draft of a proposed accounting standards update approved on Jan. 10, 2018.
  • The impact of the new tax law on regulatory capital.
  • Guidance on net operating loss carryback calculations for reporting periods beginning on or after Jan. 1, 2018.

Agency Resources

To view The Federal Reserve’s statement, SR 18-2, click here. This guidance applies to all Federal Reserve supervised financial institutions, including those with $10 billion or less in consolidated assets, that file regulatory reports prepared in accordance with generally accepted accounting principles (GAAP).

To view the FDIC’s letter, FIL-6-2018, click here. This Financial Institution Letter applies to all FDIC-supervised banks and savings associations, including community institutions with total assets under $1 billion.

To view the OCC’s statement, OCC BULLETIN 2018-2, click here. This guidance applies to all OCC-supervised institutions.


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Contacts

David Henderson, Tax Partner | DHG Financial Services
704.367.5502 | david.henderson@dhg.com

Nikki Yarborough, Tax Partner | DHG Financial Services
919.875.4969 | nikki.yarborough@dhg.com

Heather Wallace, Tax Partner | DHG Financial Services
205.212.5319 | heather.wallace@dhg.com

 

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