The Financial Accounting Standards Board (FASB) has issued an Accounting Standards Update (ASU) that improves the accounting and disclosures for investments in tax credit structures. The ASU is a consensus of the FASB’s Emerging Issues Task Force (EITF). The ASU allows reporting entities to elect to account for qualifying tax equity investments using the proportional amortisation method, regardless of the programme giving rise to the related income tax credits.
The ASU responds to stakeholder feedback that the proportional amortisation method provides investors and other allocators of capital with a better understanding of the returns from investments that are made primarily for the purpose of receiving income tax credits and other income tax benefits. Reporting entities were previously permitted to apply the proportional amortisation method only to qualifying tax equity investments in low-income housing tax credit (LIHTC) structures. In recent years, stakeholders asked the FASB to extend the application of the proportional amortisation method to qualifying tax equity investments that generate tax credits through other programmes, which resulted in the EITF addressing this issue.
Earlier in March, The Accountant covered on the FASB’s publication of a proposed Accounting Standards Update (ASU) intended to improve the accounting for and disclosure of certain crypto assets. Stakeholders are encouraged to review and provide input on the proposed ASU by 6 June, 2023. The amendments in this proposed ASU would improve the accounting for certain crypto assets by requiring an entity to measure those crypto assets at fair value each reporting period with changes in fair value recognised in net income.