GAAP Flash - IFRS 16, tax reform, and foreign currency - 02.09.18
GAAP Flash - IFRS 16, tax reform, and foreign currency - 02.09.18

GAAP Flash - IFRS 16, tax reform, and foreign currency - 02.09.18

This week’s GAAP Flash includes articles about implementing IFRS 16, technology companies’ delay on moving overseas cash back to the U.S., tax planning strategies for small businesses under the new tax reform, and the strength of China’s yuan currency.

IFRS 16 compliance presents the choice to be outstanding (February 8, 2018) Accounting Today (@AccountingToday)

The new leasing standard published by the IASB, IFRS 16, will come into effect on January 1, 2019. A new leasing standard from the IASB? Yes, I said that correctly. The timing and content of IFRS 16 is very similar to ASC 842! This article serves as a reminder that if you’re adopting IFRS 16, it will require significant planning for future leases, and the process of weeding through existing lease agreements is going to be a big endeavor! The amount of information to collect and analyze probably feels overwhelming, and the 2019 adoption date will be here before you know it so, the sooner you start the process, the better!

How It’s Relevant: Just when we finished understanding and implementing the revenue recognition standards, both IFRS and GAAP are coming at you again with leasing! As companies (hopefully) just learned from implementing ASC 606, any compliance effort needs to start with a solid plan. Understanding the requirements first, then determining the best processes for success will make all the difference! Need help understanding the new requirements? We provide an IFRS Update course which includes a discussion on IFRS 16.

Tech Giants Are in No Rush to Spend Overseas Cash (February 5, 2018) The Wall Street Journal (@ WSJ)

As we discussed in last week’s GAAP Flash, the new tax law is making it easier for companies to bring overseas cash back to the United States and the tech industry (which holds more overseas cash than any other industry) stands to recognize the largest benefits. But many tech companies have yet to make any big moves! The complexities of the new tax code are being evaluated, so the hope is that companies like Alphabet and Microsoft will follow in the footsteps of Apple. Last month, Apple announced they would make a $38 billion one-time tax payment to bring the money back to the U.S. to boost the economy.

How It’s Relevant: There are some great business opportunities as part of the tax reform, but there doesn’t seem to have been as much immediate change to spending as hoped. Tax reform impacted many pieces of the tax law, for many types of industries, and some believe it was all passed too quickly! So, ensuring that the law is understood in its entirety before making big financial moves is extremely important. Here is a link to reports issued by KPMG analyzing the new tax law.

Here’s the latest sign that China is loosening its grip on the yuan (February 7, 2018) MarketWatch (@MarketWatch)

The yuan, or renminbi, is China’s government-controlled currency that typically trades at a similar rate as the U.S. dollar. But lately, the yuan is trading higher, which is probably impacted by the weaker U.S. dollar and the increase in global growth. The currency gained 3.4% against the U.S. dollar in January, which has not happened that quickly since the 1980s, so is this a sign that China’s government is loosening its grip on its currency?

How It’s Relevant: If the yuan is more freely traded, there is the potential for more foreign investment. What does investment in foreign currencies mean? It means there will be foreign transactions and translations! However, the accounting for foreign currencies can be very difficult to interpret. Check out our foreign currency slides that will help bring clarity to this important topic and feel free to contact us if you have any questions!

How the new tax law will affect your clients’ S corporations (February 6, 2018) Accounting Today (@AccountingToday)

For small businesses, the new tax law has decreased the rate for C corporations and provided a 20% tax reduction for pass-through entities (like S corps), so determining whether to structure their business as a C corp or as a pass-through entity is an important decision. As this article explains, there are many factors to consider before any company structure changes should be made.

How It’s Relevant: Spending most of my career in a tax department, I only saw a handful of C corporations. The dreaded double taxation made the structure favorable only in a few circumstances. But profitable pass-through entities may end up benefiting if they decide to form C corps, especially because the qualified business deduction is set to expire in 2025. Tax planning is tricky, and we never know if new laws will be passed, and what deductions and credits may be extended. So, don’t make any big decisions quite yet! The tax bill, as it stands, has some contradictory wording, so sit tight – we will keep you updated when the IRS issues clearer guidance!

Disclaimer  

This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.

Foreign Exchange Training Slides
 
IFRS Update

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