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EDITOR Barbara A. Wech, Ph.D. Department of Management, Information Systems, and Quantitative Methods University of Alabama at Birmingham COLLAT School of Business 710 13th St. South Department of Management, Information Systems, & Quantitative Methods Birmingham, Alabama 35233 bawech@uab.edu
In recent years the Financial Accounting Standards Board (FASB) launched the Simplification Initiative to reduce unnecessary complexity in the various areas of accounting. The Simplification Initiative has resulted in several narrow scope changes to the accounting guidance while maintaining the decision usefulness of the financial information. The FASB has issued the following Accounting Standards Updates (ASU) in an effort to simplify the guidance in Accounting Standards Codification (ASC) Topic 740, entitled Income Taxes: • ASU 2019-12, entitled Simplifying the Accounting for Income Taxes. • ASU 2016-16, entitled Intra-Entity transfers of Assets Other Than Inventory. • ASU 2015-17, entitled Balance Sheet Classification of Deferred Taxes. This guidance reflects changes to the accounting standards that are a direct result of the Simplification Initiative. In general, the objective of the FASB with this new guidance is to reduce the cost and complexity associated with the accounting requirements related to income taxes while maintaining 20
the decision usefulness of the financial information.
GUEST WRITERS Dr. Steve Grice, CPA Sorrell College of Business School of Accountancy Botts Professor of Accounting 334-670-3136 sgrice@troy.edu Dena Mitchell, CPA Sorrell College of Business School of Accountancy Assistant Professor of Accounting Troy University dsmitchell@troy.edu
Eliminated Exceptions to the Provisions of ASC Topic 740 (ASU 2019-12) The FASB issued ASU 2019-12 to reduce the complexity of the accounting guidance by eliminating the following exceptions to the provisions of ASC Topic 740. Incremental approach for intraperiod tax allocation. ASC 740-20-45-7 indicates that the tax effect of pretax income or loss from continuing operations should be determined by a computation that does not consider the tax effects of items that are not included in continuing operations. For example, assume that a reporting entity has a $1,000 ordinary loss from continuing operations and an $1,800 gain from discontinued operations that is a capital gain for tax purposes. Also, assume the reported entity determined that a Fall 2021 | The Cooperative Accountant
