At the end of every year, individuals are full of the giving spirit and many call this the most wonderful time of the year. But, if you are the key accounting or finance person in your organization, then this time of year can be far from the most wonderful time of year. Year end tax reporting, financial reports, building next year’s budget, hiring decisions, system migrations and more keep the accounting and finance team hopping through Q4 and Q1.
Let me add a few more bullets, to your already long end-of-year list, that shouldn’t be overlooked. If due attention is given, you can save yourself from a myriad of problems down the road.
- ASC 718 – Stock-based Compensation to Employees. The calculations required to perform the journal entries and disclosures can be cumbersome. PwC’s 392-page guide provides enough detail for you to perform the calculations yourself…but how in the world do you find time for that!
- ASC 505 – Stock-based Transactions with Non-employees. Who knew that there are different rules for stock-based compensation to employees AND non-employees? The rules between ASC 718 and ASC 505 are subtle, but important.
- ASC 805 – Accounting for Business Combinations. If you acquired a business this past year, then you may need to allocate the excess value above the tangible assets to the identifiable intangible assets and to goodwill.
- IRC 409A – The tax authorities require that any non-qualified deferred compensation (most stock option plans) is granted at or above fair market value. If the compensation is granted below fairmarket value, then both the company and the grant recipient could incur unwanted tax liabilities and penalties.
- ASC 350 – Goodwill and Other Intangibles. If your company carries a goodwill balance, then that balance will need to be tested for “impairment” at least annually. Impairment exists when the carrying amount of goodwill exceeds its implied fair value. A two-step approach is needed to determine 1) is it impaired, and 2) by how much?
- ASC 815 – Accounting for Derivatives and Hedging. If your company has warrants or convertible notes, then you may need to report those instruments at fair value. Doing say may require complex valuation analysis.
- Gift and Estate Planning – If you made a transfer or a gift in a private company’s stock, you wil lneed a qualified appraisal (IRC § 170(f)(11)) to substantiate the transaction price. With ever-changing tax rules (IRC §2704), now is a great time to affect those transactions.
- IRS Form 8283 – If you donated or plan to donate securities in a private company that are worth more than $5,000 to a charity and want to claim the tax deduction, then you will need a qualified appraisal (IRC § 170(f)(11)) to file with your tax return, along with IRS Form 8283.
Keeping track of all of these complex year end tax reporting and financial reporting requirements can be a full-time job unto itself. Let EP do it for you. Give us a call at (650) 260-5092 or email me at firstname.lastname@example.org and let us help you make this the most wonderful time of the year.