News

Change in Presentation of Deferred Taxes

By Dennis Gardiner, Managing Partner

In November 2015, the FASB issued ASU 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes, as part of its accounting standards simplification initiative. The scope of the standard applies to all entities that present a classified balance sheet.

Under current GAAP, you are required to separate deferred income tax liabilities and assets into current and non-current amounts in a classified balance sheet. FASB has determined that users of financial statements didn’t find this information useful. As a result, the new standard will require you to classify and present all deferred income tax liabilities and assets as noncurrent in a classified balance sheet.

For our clients, the amendments 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 adoption is permitted.

You may apply the amendments prospectively to all deferred tax liabilities and assets or retrospectively to all periods presented. Regardless of when you apply this change, you will need to disclose the nature of and reason for the change in accounting principle. There will be additional disclosures regardless of whether you apply this amendment prospectively or retrospectively, regarding the accounting change.