FASB Issues Update Allowing Proportional Amortization Method for All Tax Credit Structures
The Financial Accounting Standards Board (FASB) today published Accounting Standards Update (ASU) 2023-02, which expands the proportional amortization method to account for investments in all tax credit structures. That accounting method was previously allowed only for low-income housing tax credit (LIHTC) investments, but now is available, by election, to all community development tax credit investment reporting that meets five conditions. Under the new guidance, reporting entities can make accounting policy elections on a tax-credit-program-by-tax-credit-program basis, rather than for individual investments or at the reporting entity level. For public business entities, the new amendments are effective for fiscal years beginning after Dec. 15, 2023. For all other entities, the amendments are effective for fiscal years beginning after Dec. 15, 2024. Early adoption is permitted for all entities in any interim period. For calendar-year-end entities, this would include the first quarter ending March 31, 2023.
The Novogradac Generally Accepted Accounting Principles (GAAP) Working Group will continue to discuss the update as well as additional improvements that will allow more investments to qualify. For more information on that working group, contact Brad Elphick.