The IRS today released an advance version of Notice 2015-40 to request comments regarding the effect on taxpayers’ methods of accounting of new financial accounting revenue recognition standards—Revenue from Contracts with Customers—announced by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB).
Read text of Notice 2015-40 [PDF 38 KB]
In a May 2014 joint announcement, the FASB and the IASB announced new financial accounting standards for recognizing revenue.
The new standards for the timing of income for financial accounting purposes may affect the timing of income for tax accounting purposes for many taxpayers, such as taxpayers:
The new standards may affect some industries more than others. For example, it has been noted that the new standards may affect the software, entertainment, manufacturing, and construction industries because the new standards may change the timing of income recognition for financial accounting purposes significantly for these industries.
As the IRS noted, accounting method changes for federal income tax purposes require the permission of the IRS.
Notice 2015-40 states that the new standards raise a number of substantive and procedural issues for the IRS, including whether the new standards are permissible methods of accounting for federal income tax purposes, the types of accounting method change requests that will result from adopting the new standards, and whether the current procedures for obtaining IRS consent to change a method of accounting are adequate to accommodate those requests.
Because adoption of the new standards may create or increase differences between financial accounting and tax accounting rules, the IRS and Treasury Department are considering whether to issue guidance on the new standards and request public comments on the scope, substance, and form of guidance needed.
Specifically, comments are requested on issues of conformity between the new standards and the Code, including the following issues:
Comments are due on or before September 16, 2015.
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