On March 29th, the Financial Accounting Standards Board (FASB) published an Accounting Standards Update (ASU) titled
“Topic 323, Investments—Equity Method and Joint Ventures: Accounting for Investments in Tax Credit Structures Using the Proportional Amortization Method”. The ASU is a consensus of the FASB’s
Emerging Issues Task Force (EITF).
Under the ASU for Investments in Tax Credit Structures:
- issuers may now choose to account for qualifying tax equity investments using the proportional amortization method, no matter which program is giving rise to the related income tax credits
- the update responds to stakeholder feedback that the proportional amortization method provides investors and other allocators of capital with a greater understanding of the returns from investments that are primarily made for receiving income tax credits and benefits
The ASU, an amendment of the FASB Accounting Standards Codification (Codification), provides public and private companies and non-profit organizations with a practical expedient to apply guidance. The Codification is the source of authoritative generally accepted accounting principles (GAAP) determined by the FASB to be used by nongovernmental entities. Although an ASU is not authoritative, it is a document that discloses how the Codification is being amended, and provides other information to help GAAP users understand how and why GAAP is changing and when the changes will go into effect. For public business entities, these amendments are effective for fiscal years beginning after December 15, 2023.
The ASU is available at fasb.org.
Source:
FASB Improves Accounting for Investments in Tax Credit Structures (fasb.org)
