January 29, 2018

Tax Reform: “Mirror, Mirror on the Wall, Where’s the Biggest Charge of All?”

Since we nearly gave many of you a pre-Christmas coronary by raising the topic of tax reform’s impact on deferred tax assets, you’re probably not thrilled to see another blog from me on income statement hits resulting from the new tax legislation. Sorry about that, but it’s got to be done.

So, anyway, here it goes – it turns out that whatever benefits tax reform may ultimately have, this “Audit Analytics” blog says it’s resulting in pretty eye-popping charges to some companies’ bottom lines:

Under GAAP, tax assets and liabilities are required to be re-measured during the period in which the new tax legislation is enacted. In some cases, if the impact is expected to be material, companies are also required to disclose estimated impact through 8-K filings. So far, at least 36 companies made such a disclosure, reducing the net income by a total of at least $50 billion. Eight of these 36 companies disclosed write-downs that exceeded $1 billion. Interestingly, two out of 36 companies have large deferred tax liability positions, so the effect is expected to be positive.

Citigroup’s the leader in the clubhouse with a staggering $20 billion estimated charge – and 6 of the other 7 companies taking whacks exceeding $1 billion are also financial institutions. The charges won’t all result from valuation allowances for deferred tax assets – the one-time repatriation tax on foreign cash will also represent a big hit for some companies.

How big is this going to get? The blog points to this MarketWatch article, which estimates that the 15 companies with the largest deferred tax asset balances may have to write down nearly $75 billion.

Tax Reform: First Batch of Disclosures Is “In”!

In this blog, Steve Quinlivan notes the disclosures made by companies with fiscal quarters ended 12/31/17, but not fiscal-year ends that show the effects of the tax legislation in recently filed Form 10-Qs in accordance with SAB 118. Some may find these disclosures as a useful starting point for drafting Form 10-K disclosures…

Tax Reform: Memos of All Kinds

In our “Regulatory Reform” Practice Area, we continue to post memos of all kinds about the impact of tax reform on business practices &¬†disclosure obligations – some with nifty charts & diagrams (like this one). Check it out!

John Jenkins