While legislators worked to act as swiftly as possible, the American Taxpayer Relief Act of 2012 (2012 Act) was not signed into law until 2013. President Obama signed into law the last-minute compromise on January 2, 2013, settling many unresolved fiscal cliff tax issues, extending some of the 2001 and 2003 tax cuts and making other provisions permanent. Under existing accounting standards, entities must recognize the effects of an enacted tax law or rate change in the period that includes the enactment date, which is the period that includes January 2, 2013.
For financial reporting periods ending on or before January 1, 2013, benefits of expired provisions, such as the research tax credit, will not be considered in financial accounting for income taxes. Instead, both the 2012 and 2013 impacts of these extended provisions will be reflected in tax accounts of the subsequent period. In the meantime, companies should consider enhancing financial statement disclosures to include additional discussion of the impact on income tax accounts.