Companies have up to a year for new U.S. tax bill reporting: SEC
WASHINGTON – U.S. financial regulators said on Friday that because the new tax bill could make timely financial reporting difficult, public companies can make reasonable estimates when uncertain of the impact of the new tax law in financial reports, and will have up to a year to report final numbers.
The Securities and Exchange Commission bulletin comes after the U.S. Chamber of Commerce warned on Thursday that some U.S. listed companies may struggle to file their annual financial reports on time because the Republican-led overhaul of the country’s tax system may prompt a raft of additional disclosures.
In a statement on the Tax Cuts and Jobs Act (TJCA) issued on Friday, SEC Chairman Jay Clayton and Commissioners Kara Stein and Michael Piwowar said guidance was similar to that given in the past when tax law changes affected financial reporting.
The $1.5 trillion tax bill, signed into law on Friday by U.S. President Donald Trump, will significantly affect many companies’ year-end financial statements because listing rules oblige them to flag any potential material risks or changes to their operations and financial outlook to shareholders.
The bill significantly lowers the income tax rate for U.S. companies – to 21 percent from 35 percent – allows them to repatriate cash from overseas, and modifies numerous deductions, among other changes.
Public companies have been given a “measurement period” to study the changes created by a new law.
During the measurement period, the SEC expects companies to complete their accounting and that “in no circumstances should the measurement period extend beyond one year from the enactment date,” of the TJCA.
Companies will also need to make disclosures during the measurement period, including any updates to provisional amounts given earlier, or newly discovered reporting implications from tax bill.
For companies with fiscal years ending Dec. 31, getting the necessary analysis done in time could be tough, the Chamber said.
The tax bill It is the largest such overhaul since the 1980. In addition to slashing the corporate rate, it temporarily reduces the tax burden for most individuals.
(Reporting by Chris Sanders; Editing by Leslie Adler)