September 29, 2022
EY updates Technical Line on accounting for the effects of the Inflation Reduction Act and the CHIPS and Science Act
EY's Technical Line, Accounting for the effects of the Inflation Reduction Act and the CHIPS and Science Act, has been updated to reflect the FASB staff's response to a technical inquiry about whether a company should consider the effects of being subject to the new corporate alternative minimum tax (CAMT) in the future, when assessing the realizability of tax benefits from deductible temporary differences and carryforwards, as well as tax credits.
As ASC 740 does not specifically address this issue, the FASB staff said a company could make an accounting policy election to either consider the effect of the CAMT system when evaluating the need for, and the amount of, a valuation allowance or account for the effects on deferred tax assets and carryforwards and other tax credits in the period they arise. The policy elected should be applied consistently. The FASB staff limited the application of this view to the accounting for the new US CAMT, and said a company should have transparent disclosures about its policy election.
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Technical Line for September 29, 2022