October 4, 2022

RB Group

Business Service

FASB mulls expanding use of tax credit accounting treatment

Dive Transient:

  • The Monetary Accounting Standards Board will weigh whether or not to expand the proportional amortization method of accounting beyond lower-revenue housing tax credit score investments (LIHTC) on Wednesday, in accordance to a FASB discover.
  • In September the board voted 7- to insert the job to its Emerging Difficulties Undertaking Force agenda and to assess whether or not the existing conditions for analyzing no matter if an financial commitment could be accounted for employing the proportional amortization was “operable” for other investments other than LIHTC.
  • FASB issued the steerage in 2014 in portion to encourage buyers to support lower-money housing jobs that might if not deficiency funds, according to Tyler Baity, managing director at Forvis, an international CPA and advisory agency. 

Dive Perception:

The accounting cure could be expanded to be used in conjunction with these kinds of other systems as New Markets Tax Credits, Historic Rehabilitation Tax Credits and Renewable Electrical power Tax Credits, Baity wrote in a March 31 update. It also could impression Solar Investment Tax Credits and Output Tax Credits.

The U.S. accounting standards setter beforehand furnished five conditions that an expense in a tax credit score composition must satisfy to apply the proportional amortization approach. Investments in other tax credit buildings are usually accounted for applying the fairness or charge solutions less than which gains and losses and tax credits are offered on a gross basis on earnings statements, according to FASB.

In June EITF, made in 1984 to assist FASB determine difficulties and give timely assistance on rising troubles, moved to guidance the growth of the accounting method’s use. It did not specify which tax credit history proportional amortization would be expanded to, but alternatively eradicated a limitation that it could only be utilized to structures that make tax credits by means of the federal LIHTC method, in accordance to FASB spokesperson Christine Klimek.