This ASU Contains “Classified” Information

deferred taxesThe crux of a recent Accounting Standards Update (ASU) is how the deferred taxes are classified.  And the not-so-secret solution to the Financial Accounting Standards Board’s (FASB) ongoing Simplification Initiative can be found in ASU 2015-17, Balance Sheet Classification of Deferred Taxes.  The password is “noncurrent.”

The Simplification Initiative, implemented in 2014, strives to reduce the cost and complexity of financial reporting, while preserving or improving the value of the financial statements to users.   Additionally, the amendments in the ASU will align standards with the presentation of deferred taxes required by International Financial Reporting Standards (IFRS).

The new ASU will require that all deferred taxes be classified as noncurrent assets or liabilities on the classified balance sheet.  Entities will not be required to determine whether or not a deferred tax asset is current or noncurrent.  The ASU applies to all entities that present a classified balance sheet, and its aim is to simplify accounting for deferred income tax assets and liabilities.

Presently, accounting principles generally accepted in the United States of America (U.S. GAAP) require deferred tax assets and liabilities to be classified as either current or noncurrent on a classified balance sheet,  based upon an estimate of when the deferred taxes were expected to be recovered or settled.  The classification provides little value to users of the financial statements, as the classification of current or noncurrent often does not align with the time period when the deferred taxes were actually recovered or settled.

The amendments in this ASU may be applied either prospectively or retrospectively to all periods presented. If the ASU is applied prospectively, the entity should disclose the nature of and reason for the change in accounting principle and a statement that prior periods were not retrospectively adjusted in the financial statement notes for the first interim and first annual period of change. If the ASU is applied retrospectively, the entity should disclose in the financial statement notes for the first interim and first annual period of change, the nature of and reason for the change in accounting principle and quantitative information about the effects of the accounting change on prior periods.

For public business entities, the ASU is effective for financial statements issued for annual periods beginning after December 15, 2016, and interim periods within those annual periods. For all other entities, the amendments in the ASU are effective for financial statements issued for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018.  Early application is permitted for all entities.

It’s no secret that PYA can help your business make sense of classified balance sheets and discuss how new ASUs affect your financial statements.  If you have questions about this ASU, or would like to request a speaker on this topic for your organization or event, contact PYA at (800) 270-9629.


Mike Shamblin

Mike Shamblin

Managing Principal of Audit & Assurance Services

Related Posts
In the nonprofit world, organizations are fueled and sustained by generous contributions and grants, which are used to support the organization’s mission.  Although such funding can often be the deciding...
Read More

“Threading the Needle”—Accounting Standards Update Closes Hole in Nonprofit Grant Guidance

PYA, a national professional services firm headquartered in Knoxville, has been awarded a 2018 Top Workplaces honor by the Knoxville News Sentinel. The award is a result of employee feedback...
Read More

Knoxville News Sentinel Names PYA a Winner of the Greater Knoxville Area 2018 Top Workplaces Award

The new Tax Cuts and Jobs Act (TCJA) can be confusing for many-- especially small business owners.  Although many aspects of the TCJA have been discussed, one component of the...
Read More

Government Clamps Down on “Deductible Fun” for Businesses

A recent Accounting Standards Update (ASU) addresses land easements and their accounting under the new lease standards.  In January 2018, the Financial Accounting Standards Board (FASB) issued ASU 2018-01 Leases:...
Read More

Land Easements—Guidance for Implementing New Lease Accounting Standards

Stakeholders seeking clarity were behind the latest Accounting Standards Update (ASU) issued by the Financial Accounting Standards Board (FASB).  In response to questions raised, the FASB released ASU 2018-03: Technical...
Read More

Measuring Fair Value: New ASU Offers Clarity

Businesses are increasingly reliant on technology to achieve organizational objectives. However, with the convenience and efficiency of technology come intensifying risks of data loss and theft. High-profile data breaches top...
Read More

Cybersecurity Framework “SOCs” It to Cyber Threats

To help you organize and prioritize important 2018 deadlines, we’ve provided this summary of due dates for various tax-related forms, payments, and other actions.  Be aware that some deadlines have...
Read More

No Excuses—New Tax Deadlines You Need to Know

In the wake of passage of the Tax Cuts and Jobs Act (TCJA) late last year, the IRS has taken one of the first critical steps to institute the law’s...
Read More

IRS Issues Updated 2018 Withholding Tables

The Financial Accounting Standards Board (FASB) has set forth amended guidance aimed at simplifying and reclassifying certain features of financial instruments. Accounting Standards Update (ASU) No. 2017-11 – Earnings Per...
Read More

The Update on Down Round—FASB Reclassifies Earnings Per Share

Share This Insight

If you received value from this article, please share it with your network (e.g., Facebook, Twitter, LinkedIn). Icons below for your convenience.

Stay Current

* indicates required
Monthly eNewsletters
See more newsletter and alert options.

PYA Population Health Ascend

PYA Healthcare Blog

PYA Thought Leadership Services

The Healthcare Loop