Read our previous blog post for an overview of key provisions within the new law.
President Trump signed the tax reform act into law on Friday, December 22. As the largest tax overhaul in three decades, this new tax law will affect the finances of every U.S. citizen and business.
While almost all of the law’s income tax reforms do not take effect until 2018, these income tax reforms will impact many businesses’ 2017 financial statements through adjustments required to be made to their income tax provisions prepared under Generally Accepted Accounting Principles (GAAP).
We suggest keeping the following items in mind when preparing 2017 financial statements:
- Deferred income tax assets and liabilities will need to be re-measured based on the new lower tax rates for businesses.
- This re-measurement impact will be recorded in 2017 as a current income tax (benefit) and will be reflected in the 2017 profit and loss statement, as well as in equity at the end of the year.
- The resulting adjustments to the 2017 financial statements could impact financial covenants contained in loan agreements which may result in default if sufficiently adverse.
Please reach out to your Kaufman Rossin tax professional for more information on the tax reform act and how it may affect your particular financial situation. We are following the latest developments regarding this new law and will keep you informed as guidance emerges.