The EITF has reached a final consensus to expand use of the proportional amortization method of accounting to more income tax credit programs.
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- On Dec. 1, 2022, the Emerging Issues Task Force (EITF) reached a final consensus to expand use of the proportional amortization method of accounting to equity investments in tax credit programs beyond those in low-income-housing tax credit (LIHTC) programs.
- The final consensus allows entities to elect the proportional amortization method, on a tax-credit-program-by-tax-credit-program basis, for all equity investments in tax credit programs meeting the eligibility criteria in Accounting Standards Codification (ASC) 323-740-25-1.
- While the final consensus does not significantly alter the eligibility criteria, it does provide clarifications to address existing interpretive issues. It also prescribes specific information reporting entities must disclose about tax credit investments each period.
- The final consensus is effective for reporting periods beginning after Dec. 15, 2023, for public business entities. All other entities will have an extra year to adopt. Early adoption is permitted.
- Entities will have the option of applying the forthcoming revisions using either a modified retrospective or retrospective adoption approach.
- In January 2023, the FASB will meet to consider ratifying the EITF’s consensus. Upon ratification, the FASB then would proceed with issuing a final Accounting Standards Update (ASU).