The Internal Revenue Service is extending the transition period for revising claims for the research and development tax credit, which gives taxpayers 45 days to “perfect” a research credit claim for refund prior to the IRS’s final determination on the claim, through Jan. 10, 2026.  

In October 2021, in an effort to reduce dubious claims for the R&D credit, the IRS began requiring taxpayers to include more information with their claims about all the business components and research activities they’ve performed, the individuals who performed each research activity, the information each individual sought to discover, the total qualified employee wage expenses, total qualified supply expenses and total qualified contract research expenses for the claim year.  

This past June, amid complaints about the more stringent rules, the IRS made modifications to waive some requirements. For claims postmarked after June 18, 2024, the reduced set of requirements now apply, requiring taxpayers to:

• Identify all the business components to which the Section 41 research credit claim relates for that year;
• Identify all research activities performed for each business component; and,
• Provide the total qualified employee wage expenses, total qualified supply expenses and total qualified contract research expenses for the claim year. This can be done using Form 6765, Credit for Increasing Research Activities.

The transition period for perfecting the claims has now been extended through Jan. 10, 2026. The IRS has twice before extended the amount of time it has given taxpayers to perfect an R&D tax credit claim to meet the proper documentation requirements. Last fall, taxpayers were given until Jan. 10, 2025 to perfect their claims.

For more information, visit this page on IRS.gov.

The Governmental Accounting Standards Board issued an exposure draft Monday of a proposed statement on subsequent events, which are transactions or other events that occur after the date of the financial statements but before the date when financials are available to be issued, along with an exposure draft of a proposed update to its implementation guidance for its other standards for 2025.

One of the main goals of the subsequent events standard is to reexamine the existing requirements in Statement No. 56, Codification of Accounting and Financial Reporting Guidance Contained in the AICPA Statements on Auditing Standards, related to subsequent events and improve the financial reporting requirements for subsequent events. GASB found the guidance was being applied in different ways by various state and local governments. GASB hopes to achieve greater consistency. The updates would clarify the different types of subsequent events, when note disclosures would be required, and the information that would be included in those note disclosures.

The proposed statement defines subsequent events as transactions or other events that occur after the date of the financial reporting statements but before the date the financial statements are available to be issued. The exposure draft describes the date the financial statements are available to be issued as the date at which (1) the financial statements are complete in a form and format that complies with GAAP and (2) all approvals necessary for issuance have been obtained. The proposed statement would clarify the subsequent events that constitute recognized and nonrecognized events and establish specific note disclosure requirements for nonrecognized events.

Courtesy of GASB

Implementation guidance

As for the implementation guide, the proposed guidance takes the form of questions and answers to clarify, explain or elaborate on certain GASB pronouncements. The exposure draft includes nearly 20 proposed new and amended questions and answers that address leases, accounting changes and error corrections, conduit debt obligations, cash flows reporting, compensated absences, and financial reporting model improvements.

GASB periodically issues new and updated guidance to help state and local governments apply GAAP to specific facts and circumstances they encounter. 

GASB is asking for comments on the subsequent events standard by Feb. 21, 2025, and the implementation guidance by Jan. 24, 2025.

The Financial Accounting Standards Board released a post-implementation review Monday of its revenue recognition standard, reflecting on the benefits and costs of the wide-ranging standard a decade after its release.

FASB and the International Accounting Standards Board spent years working on converging their different approaches to revenue recognition under both U.S. GAAP and International Financial Reporting Standards. Unlike some of their other convergence projects, they mostly achieved alignment, and they released the rev rec standard in May 2014. Under FASB’s Accounting Standards Codification, it’s known as ASC 606 or Topic 606.

FASB generally conducts a post-implementation of its standards about a decade after they’re issued to assess whether they achieved their intended objectives. For this review, FASB’s staff did outreach to over 2,200 stakeholders from various backgrounds to get their views. The investors generally agreed that Topic 606 provides more useful, transparent information, especially through improved disclosures. Investors also agreed that Topic 606 improves the consistency and comparability of revenue across industries and achieves its expected benefits in a majority of industries. 

Patrick Dorsman/Financial Accounting Foundation

Other stakeholders, including practitioners and preparers, said the principles-based guidance with the application of judgment allows for better alignment of revenue recognition with the economics of the underlying transactions and is more adaptable to an evolving business environment. Some of the stakeholders said the new standard helps entities better understand their contracts and improve their internal processes around revenue recognition. Most of the stakeholders surveyed for the post-implemenation review viewed convergence with IFRS accounting standards as a significant accomplishment. 

“During the Revenue PIR process, we obtained an even greater appreciation for our stakeholders’ commitment to the high-quality implementation of a standard,” stated FASB chair Richard Jones and technical director Jackson Day in a joint statement Monday. “We were also pleased to learn that most stakeholders agree that, while there are lessons to be learned, overall, the revenue standard’s long-term benefits outweigh the costs of applying it.”

However, there were a few downsides. While the nature of costs were consistent with FASB’s expectations, stakeholders indicated the implementation costs were significant, especially in industries for which prior industry-specific revenue guidance was removed. While investors had to expend some effort to learn Topic 606 and understand revenue trends during the transition period, for most industries the costs incurred by investors were generally one-time costs. 

Most preparers noted their reported revenue was not materially affected, though they still needed to comprehensively review their existing contracts and practices and make changes to their processes and controls. Stakeholders found certain costs lasted beyond the implementation period. They also found that, in some cases, certain ongoing costs, such as the costs of analyzing emerging and complex arrangements and establishing related controls, aren’t solely attributable to the revenue recognition standard but also arise from business growth and innovation and would have been incurred in many cases under the previous guidance.

Income statement expense disaggregation effective date

Separately on Monday, FASB published a proposed accounting standards update to clarify the interim effective date of its disaggregation standard for public business entities that don’t have an annual reporting period that ends on Dec. 31. The proposed update clarifies the interim effective date of Accounting Standards Update No. 2024-03, Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses. The proposed ASU is open to public comment for 15 days. FASB issued the disaggregation standard earlier this month.