Form 5471: Preparing Schedule C Income Statement and Schedule F Balance Sheet

Overcoming Challenges With Functional Currency, U.S. GAAP Presentation, and Translation Adjustments

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A


Conducted on Thursday, August 6, 2020

Recorded event now available

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Program Materials

This webinar will provide practical steps for meeting the requirements of Form 5471 Schedules C and F, the income statement and balance sheet, for tax preparers. Our panel will provide insights into meeting the IRS requirements for including these statements, including reporting these in functional currency and under U.S. GAAP.

Description

Form 5471, Information Return of U.S. Persons With Respect to Certain Foreign Corporations, filing is required for specific U.S. shareholders, officers, owners, and others with certain connections to certain foreign corporations. This form provides the IRS with information on activities between these individuals and foreign companies, which makes the proper completion of the form critical. With penalties of $10,000 for non-filing, saying there are substantial penalties related to this form is an understatement.

Schedules C and F, the income statement and balance sheet, are integral parts of Form 5471. Although most businesses have these statements, knowing how to include these statements with the 5471 is not always apparent. The first instruction on the face of Schedule C, the income statement, states: "Important: Report all information in functional currency in accordance with U.S. GAAP." Some financial statements will need to be converted into functional currency. Other statements may be prepared but reported using tax basis, cash basis, or IFRS. Knowing how to handle these challenges is essential for tax professionals preparing this form.

Schedule F, the balance sheet, is required to be reported in USD, which leads to challenges with retained earnings reconciliation between functional currency and USD balance sheets. The balance sheet exchange rate, since it is for a specific date, will use a different exchange rate than the one used covering a period for Schedule C. Handling these translation differences is confusing. Accurately reporting and including fixed assets on the balance sheet can aid in outlining the potential qualified business asset investment and corresponding GILTI deduction.

Listen as our panel of foreign tax experts explains converting financial statements to functional currency, converting financial statements to GAAP, handling translation adjustments, and best practices for properly including the income statement and balance sheet on Form 5471.

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Outline

  1. Form 5471: an overview
  2. Schedule C: income statement
  3. Schedule F: balance sheet
  4. Best practices

Benefits

The panel will review these and other key issues:

  • Filing requirements for Form 5471
  • Translating financial statements to functional currency for Form 5471 Schedules C and using USD for Schedule F
  • Handling translation adjustments
  • Converting financial statements prepared on a basis other than GAAP to GAAP
  • Mitigating IRS scrutiny of the income statement and balance sheet

Faculty

Chan, Maria
Maria (Ri) Chan

STS-Int'l Managing Director
BDO USA

Ms. Chan has over 25 years of experience providing international, federal, and state tax compliance and consulting...  |  Read More

Dougherty, Alison
Alison N. Dougherty, J.D., LL.M., CPA

Director, Tax Services
Aronson

Ms. Dougherty specializes in U.S. international tax reporting, compliance, consulting, planning, and structuring as a...  |  Read More

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