Date: January 2018

The staff of the Division of Corporation Finance and the Office of the Chief Accountant of the Securities and Exchange Commission (SEC staff), from time to time, issue statements in staff accounting bulletins (SABs) that express a view on the application of the Financial Accounting Standards Board (FASB) Accounting Standards Codification® and/or other disclosure requirements. The statements in SABs are not rules or interpretations of the Commission, nor are they published as bearing the Commission’s official approval. They represent interpretations and practices followed by the SEC Staff in administering the disclosure requirements of the federal securities laws.

The views and interpretations of the SEC staff are not directly applicable to private companies and not-for-profit entities (as defined in the FASB Codification Master Glossary). However, in the past some private companies and not-for-profit entities have voluntarily applied the guidance in SABs.

The SEC staff recently issued SAB 118 on the application of Topic 740 on income taxes in the reporting period that includes the date on which the 2017 Tax Cuts and Jobs Act (Act) was signed into law.

Given the longstanding practice of private companies electing to apply SABs, would the FASB staff object to private companies and not-for-profit entities applying SAB 118?

Based upon the longstanding practice of private companies electing to apply SABs, the FASB staff would not object to private companies and not-for-profit entities applying SAB 118. If a private company or not-for-profit entity applies SAB 118, they would be in compliance with GAAP.

The FASB staff believes, however, that if a private company or a not-for-profit entity applies SAB 118, it should apply all relevant aspects of the SAB in its entirety. This would include the disclosures listed in SAB 118. The FASB staff also believes that a private company or a not-for-profit entity that applies SAB 118 should disclose its accounting policy of applying SAB 118 in accordance with paragraphs 235-10-50-1 through 50-3 of the Accounting Standards Codification.