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From Securities Regulation Daily, December 22, 2017

SEC issues tax reform guidance

By Mark S. Nelson, J.D.

The SEC issued guidance for companies that will be making public disclosures regarding their financial statements in light of the newly enacted Tax Cuts and Jobs Act. President Trump signed the TCJA into law today, bringing to fruition a decades-long process of revising the tax laws in a manner that broadly impacts virtually all public companies. A statement by all three current commissioners said that the new guidance (Fact Sheet) will help companies with a variety of disclosures matters, including the treatment of deferred tax assets. The statement also said the guidance tracks guidance previously issued by the SEC in response to prior tax law changes.

Specifically, the SEC amended Staff Accounting Bulletin No. 118 to add Section EE in order to deal with companies’ concerns about matters not dealt with completely by Accounting Standards Codification No. 740, including the income tax effects of the TCJA. The SEC’s main concern is that companies will be unable to evaluate these tax consequences for financial statements to be issued soon that include the TCJA’s date of enactment, December 22, 2017.

As a result, under revised SAB 118, the SEC said a company should include a reasonable estimate of the income tax effects of the TCJA in the first reporting period for which the company is able to make such determination. A company will need to establish a provisional amount during a "measurement period," which is defined as the reporting period that includes the enactment date of the TCJA and the time when the company has evaluated any information needed to meet the requirements of ASC 740. The SEC also issued a new Form 8-K Compliance and Disclosure Interpretation (Question 110.02) to clarify required disclosures under Item 2.06.

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