Entities will soon be required to present deferred tax liabilities and assets as noncurrent in their financial statements. The Financial Accounting Standards Board (FASB) recently released an accounting standards update (ASU) to reduce the complexity in current practice. ASU 2015-17 Income Taxes (Topic 740) Balance Sheet Classification of Deferred Taxes modifies current generally accepted accounting procedures (GAAP), in which entities separate deferred income tax liabilities into current and noncurrent accounts in their statement of financial position.

Stakeholders told the FASB that the practice did not provide financial statement users with pertinent information about an entity's financial position. The existing method of classifying between current and noncurrent deferred taxes generally does not align with the period in which the entity expects to settle or recover the liabilities and can be costly to prepare. In making it required that entities present all deferred taxes as noncurrent, the FASB aims to streamline financial statement reporting.

The ASU does not affect the current requirement that deferred tax liabilities and assets of a tax-paying component of an entity be offset and presented as a single amount by tax jurisdiction.

Effective Date

Public business entities will be required to adopt the ASU in fiscal years and interim periods beginning on or after December 15, 2016 (calendar year 2017). All others must adopt for annual periods beginning after December 15, 2017 (calendar year 2018) and interim periods beginning after December 15, 2018 (calendar year 2019). Early adoption is permitted, so long as the entity makes the change at the beginning of a reporting period. Entities can choose whether to apply the ASU prospectively or retrospectively to all financial periods presented in the statement.

Regardless of when entities adopt, disclosures will be required about the nature of the accounting change made.

For More Information

If you have specific comments, questions or concerns, please share them with Mark Winiarski of the MHM Professional Standards Group. Mark can be reached at mwiniarski@cbiz.com or 816.945.5614.

Published on November 30, 2015