The Internal Revenue Service is proposing procedures for how a taxpayer can ask for automatic consent to change an accounting method in preparation for the Financial Accounting Standards Board’s new revenue recognition standard.
Notice 2017-17 requests comments on a proposed revenue procedure that, if finalized, would provide procedures for how a taxpayer might request automatic consent from the IRS to change a method of accounting for recognizing income when the change is made for the same taxable year as the taxpayer adopts the new revenue recognition standard.
FASB and the International Accounting Standards Board released the revenue recognition standard in May 2014 after a decade of work harmonizing U.S. GAAP with International Financial Reporting Standards. The new standard takes effect for publicly-traded companies beginning with annual reporting periods beginning after Dec. 15, 2017, and for most other businesses, for annual reporting periods beginning after Dec. 15, 2018. The rules also allow for early adoption of the revenue recognition standard for reporting periods beginning after Dec. 15, 2016.
In June 2015, the IRS and the Treasury Department published a notice asking for comments on federal tax accounting issues related to the adoption of the revenue recognition standard, including whether the new standards are permissible methods of accounting for federal income tax purposes, the types of accounting method change requests that might result from adopting the new standards, and whether the current procedures for obtaining IRS consent to change a method of accounting are adequate to accommodate those requests. However, only a few comments were received.
Some commenters asked for more time to respond and others reported that, as a result of adopting the new standards, taxpayers might request multiple changes in accounting method. The notice issued Tuesday by the IRS addresses only the procedures for obtaining IRS consent to a qualifying same-year method change. The Treasury Department and the IRS are still looking for comments on issues of conformity between the new standards and the Internal
Revenue Code and the Treasury Regulations, and they are considering addressing those issues in separate guidance.
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