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IRC 451(b) and Revenue Recognition: Proposed Regulations, Changes in Accounting Method, Special Accounting Methods

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

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Conducted on Tuesday, June 30, 2020

Recorded event now available

or call 1-800-926-7926

This course will assist tax practitioners in complying with Section 451(b) and its required inclusion of income, not later than for financial accounting purposes, in tax returns for businesses. Our panel will explain the proposed regulations, applicable financial statements, special accounting methods, recognizing revenue, changing accounting methods, and the relativity of implementing Topic 606 with this code section.

Description

Section 451(b) requires recognition of income, no later than when included in an AFS (applicable financial statement) for accrual-basis taxpayers. Additional proposed regulations issued September 2019 address what is considered a special accounting method. The regs also cover handling businesses with an AFS one year and no AFS the next, cost-of-goods sold offsets, differences between taxable year-end dates and financial reporting year-end dates. The regs also seek to clarify other matters to comply with the requirements of Section 451(b) added under the recent tax act.

Accelerating the struggle is Topic 606, Revenue from Contracts with Customers issued by the FASB, which generally requires recognition of income when transferring goods or services to the customer fulfills a performance obligation. This accounting announcement comes with required implementation dates for public companies (and certain others) with annual reporting periods beginning after Dec. 15, 2017, and an effective date for annual reporting periods beginning after Dec. 15, 2018, for all others.

Topic 606 implementation requires a change of accounting method for many businesses. Fortunately, Revenue Procedure 2018-60 provides for automatic changes, and a streamlined procedure is available that allows certain taxpayers to omit the filing of Form 3115. Understanding how to comply with these new income recognition requirements but delay income recognition when possible is critical for tax advisers to businesses.

Listen as our panel of experts explains key considerations under these new income recognition requirements, including which companies are subject to 451(b), how to defer revenue inclusion, and best practices for implementing these new standards.

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Outline

  1. 451(b): an overview
  2. Topic 606, Revenue from Contracts with Customers
  3. Proposed Section 1.451-3 regulations
  4. Advance payments under 451(c)
  5. Changes in accounting method
  6. Best practices

Benefits

The panel will review these and other critical issues:

  • What is an applicable financial statement?
  • What businesses are impacted by 451(b)?
  • What is a special method of accounting?
  • Which companies qualify for the streamlined method change?
  • How do accrual-basis businesses avoid income inclusion under 451(b)?

Faculty

Corcoran, Ryan
Ryan Corcoran
Senior Manager - Washington National Tax
RSM US

As part of RSM’s Washington National Tax practice, Mr. Corcoran specializes in federal accounting methods areas...  |  Read More

Messner, Karen
Karen Messner
Tax Managing Director
BDO USA

Ms. Messner's work has focused on consulting on federal tax accounting issues including accounting methods, timing...  |  Read More

Strong, David
David Strong, CPA
Partner
Crowe

Mr. Strong is a leader in the delivery of tax accounting services related to inventory valuation, accounting method...  |  Read More

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