The Financial Accounting Standards Board has issued an accounting standards update to improve how deferred taxes are classified on the balance sheet.

FASB is issuing the update as part of its simplification initiative to reduce complexity in accounting standards. The update eliminates the current requirement for organizations to present deferred tax liabilities and assets as current and noncurrent in a classified balance sheet. Instead, organizations will now be required to classify all deferred tax assets and liabilities as noncurrent.

The amendments apply to all organizations that present a classified balance sheet. For public companies, the amendments are effective for financial statements issued for annual periods beginning after Dec. 15, 2016, and interim periods within those annual periods.    For private companies, not-for-profit organizations and employee benefit plans, the amendments are effective for financial statements issued for annual periods beginning after Dec. 15, 2017, and interim periods within annual periods beginning after Dec. 15, 2018.

Earlier application is permitted for all organizations as of the beginning of an interim or annual reporting period.

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