New IRS Rules on Foreign CurrencyBy
Accounting changes are in the offing for companies who do business overseas. That’s because of new Internal Revenue Service (IRS) rules related to income and currency gain or loss with respect to a §987 qualified business unit (QBU). The IRS published final and temporary rules on December 7, 2016. They go into effect on January 1, 2018.
Accounting systems will have to be changed, according to Benjamin R. Shreck, tax counsel at the Tax Executives Institute. “The timeline for making changes to a taxpayer’s underlying accounting systems may range from 12 months to several years,” explains Shreck. “Indeed, because any changes would be made solely for tax compliance purposes—as there are no similar changes required for U.S. GAAP or IFRS—companies may not expend the necessary resources to fully modify their enterprise resource planning (ERP) systems. Thus, many taxpayers may track the §987 calculations required by the new regulations manually, substantially increasing the chances of compliance errors.”