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September 12, 2014

US legislators oppose accrual-based accounting

By Testabc

The majority of the U.S. House of Representatives have urged the House leadership to not promote accrual-based accounting for tax purposes.

Over a half, 233 out of 432 current voting members signed a letter stating that a transition to the accrual method "will have a severely detrimental impact on thousands of businesses in our districts."

Last month, a similar effort in the US senate gained the backing of 46 out of 100 members of that chamber.

The letter, sent on 11 September to Speaker John Boehner and other members of the House leadership, read:

"Those who use the cash method of accounting include many of our local job creators and professionals including accountants, architects, attorneys, dentists, engineers, farmers, physicians and financial service professionals."

"Importantly, the cash method of accounting is the foundation upon which these businesses have built their business models for decades," it continued.

The accrual method of accounting recognizes income when a service is performed, regardless of when cash is collected.

"If forced to pay taxes before income is received, less money would be available to small businesses for growth and job creation," the lawmakers wrote. "Cash flow management becomes far more complex as a result, and will likely trigger the need for additional outside financing."

The American Institute of Certified Public Accountants (AICPA) president and chief executive officer Barry Melancon welcomed the initiatives in both chambers.

"Colleagues from state CPA societies and our members have been instrumental in this effort," Melancon said. "The accrual accounting mandate is bad tax policy that should be abandoned by the House and Senate."

Related article

Many in US senate oppose accrual accounting for tax purposes

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