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AICPA Calls for Tax and Financial Accounting Clarifications

Posted on Aug. 27, 2020

The American Institute of CPAs has asked the IRS to clarify several tax accounting method issues regarding financial accounting and pandemic developments.

The August 25 letter includes several suggestions related to Accounting Standards Codification (ASC) Topic 606, “Revenue From Contracts With Customers,” and another about how to make a method change following the technical correction fixing the treatment of qualified improvement property (QIP) in the Coronavirus Aid, Relief, and Economic Security Act (P.L. 116-136).

One of the ASC 606 suggestions would restore the automatic tax accounting method change for taxpayers adopting a percentage of completion method. The AICPA noted that the list of automatic tax accounting method changes used to allow that change to be made without advance consent from the IRS and asked that the restored automatic method change include audit protection.

Another of the AICPA’s ASC 606 suggestions points out that the Financial Accounting Standards Board in June extended that standard’s implementation timeline by one year for nonpublic companies. The existing automatic tax method change for adoption of ASC 606 expires in May 2021, and the AICPA asked for a one-year extension matching FASB’s.

Public companies are already supposed to be applying ASC 606.

Finally, the AICPA asked for a clarification of QIP method changes. Acknowledging the QIP method change already issued in Rev. Proc. 2020-25, 2020-19 IRB 785, the letter suggested the IRS allow taxpayers who implemented the QIP technical correction using the standard depreciation automatic method change to stand with that decision and not have to now switch to the special QIP method change.

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