Tax Basis Financial Statements and Other Special Purpose Frameworks (8 hrs)

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Course Description

Tax Basis Financial Statements and OCBOA

The objective of this course is to discuss the general rules and applications used in the preparation of and reporting on tax basis financial statements and other bases of accounting found within the special purpose frameworks (also referred to as other comprehensive basis of accounting).

Updated for changes made by the Tax Cuts and Jobs Act, and the CARES Act. Topics include an overview of the types of special purpose frameworks, advantages and disadvantages of using tax basis financial statements, tax-basis accrual versus cash basis, reviewing the key differences between GAAP and tax-basis revenue and expenses and other differences, tax-basis disclosures, reporting options, unusual reporting and presentation issues, an overview of other types of special purpose frameworks including pure cash basis, modified cash basis, regulatory basis, contractual basis, and the other basis of accounting, and more.

Course information

This course is included in our Accounting and Auditing CPE Bundle and the MEGA CPE Unlimited Bundle


Course No. F190
Instructional Delivery Method: QAS Self-Study
Format: Online pdf (289 pages). Printed book available.
Prerequisites: General understanding of U.S. GAAP, compilation and review and auditing standards, and federal income taxation
Advance Preparation:None
Level: Overview
CPE Credit: 8 Hrs. (4 Hrs. Accounting, 4 Hrs. Auditing)
Field of Study: Accounting/Auditing
Course expiration:  You have one year from date of purchase to complete the course.
Course Revision Date: May 2021

Objectives

Course Objectives

After reading the course material, you will be able to:

  • Identify an accounting standard that exempts non-public entities from its application
  • Recall a disadvantage of the AICPA’s Financial Reporting Framework for SMEs
  • Recognize the type of criteria on which the other basis of accounting is based
  • Recall whether a one-member LLC is permitted to issue tax-basis financial statements
  • Identify the best use for tax-basis accrual financial statements
  • Recognize an example of a permanent difference
  • Recall an example of a GAAP disclosure that can be eliminated by using tax-basis financial statements
  • Identify a situation in which tax-basis financial statements might be misleading
  • Recall ways in which nontaxable revenues and nondeductible expenses can be presented in tax-basis financial statements
  • Recognize which type of exchange of assets no longer qualifies for like-kind treatment in tax-basis financial statements
  • Recognize how an entity accounts for a change in accounting method in the tax-basis of accounting
  • Identify how to account for certain transactions on tax-basis financial statements
  • Recognize whether supplementary information is part of the financial statements
  • Identify titles that are appropriate and not appropriate for tax-basis financial statements
  • Recall types of legends that might be included on pages of tax-basis financial statements
  • Recall how a statement of cash flows should be accounted for and presented in tax-basis financial statements
  • Identify categories of disclosures that should be included in tax-basis financial statements
  • Recognize elements that are and are not relevant to tax-basis financial statements in preparing a summary of significant accounting policies
  • Recall how certain GAAP disclosures should be handled in tax-basis financial statements
  • Recognize the reporting requirement for preparation and compilation of tax-basis financial statements engagements under SSARS Nos. 21-25
  • Recall the appropriate title for a review report on tax basis financial statements
  • Identify certain language that should be included in an audit report on tax-basis financial statements
  • Identify the reporting option when an entity changes from GAAP to tax-basis financial statements
  • Recognize how an accountant should report on a grantor trust or one-member LLC
  • Identify the disclosures that are required if an accountant issues a report on a tax return
  • Identify disclosures that are and are not relevant to cash-basis financial statements
  • Recognize an element that would be made in a summary of significant accounting policies for the modified cash basis
  • Identify other types of special purpose frameworks other than tax basis

This course addresses the use of tax-basis financial statements in lieu of using a traditional GAAP framework. Although other types of special purpose frameworks are discussed, the real focus of this course is on:

                                          Tax-basis accrual financial statements.

The author also discusses tax-basis (cash) financial statements, although it is not a prime focus of this course. The reason for the focus on tax-basis accrual financial statements is because, in practice, the breadth of their acceptance among users is far greater than use of other non-GAAP bases. Tax-basis accrual financial statements offer the perfect balance between simplifying the financial statement and disclosure format, coupled with offering a non-GAAP basis that third parties will accept.

Other types of non-GAAP bases (such as cash basis) are not accepted as extensively by banks and other third parties even though they can be useful in limited cases.

The author also addresses use of other non-GAAP bases within the special purpose framework, including regulatory and contractual bases, and a new “other basis” that requires use of a definite “set of logical, reasonable criteria.” These frameworks have limited application and demand in practice.

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