RubinBrown’s Construction Services Group recently attended the National Associated General Contractors’ (AGC) Financial Issues Committee meeting in Washington, D.C.
An economic update provided by Ken Simonson, the AGC’s chief economist, noted that construction spending continues to increase with the private sector outpacing the public sector.
While spending has increased to an eight year high in 2015, employment in construction related jobs has not surpassed pre-recession levels (2008), which has caused a labor shortage in the industry. However, unemployment rates within the construction industry have decreased to an eight year low to 7.5% in 2015. This is an indicator that while the majority of those individuals still in the industry are working, there is still a significant amount of workers that left the industry during the recession and have not yet returned and may not return.
In addition to the economic topics discussed above, several accounting and political issues were discussed:
- A member of the Financial Accounting Standards Board (FASB) joined the committee to discuss the implementation of new standards as well as Private Company Council (PCC) initiatives
- The revenue recognition standard was discussed. FASB has completed several initiatives in an effort to clarify the standard including the one year deferral as well as expanding on the principal vs. agent principal and practical expedients. The FASB has solicited feedback from several sources including industry task forces, webcasts and the FASB technical inquiry service.
- The final standard for leases was issued in February 2016. According to a FASB member, they expect to have PCC alternatives and there will be additional resources made available to assist with this implementation.
- The FASB member emphasized the importance of documenting policies in relation to implementation of these standards to provide an audit trail of decisions that require any sort of judgment.
- The PCC continues to work through additional projects including updates to Variable Interest Entity (VIE) guidance. Additionally, the PCC is advising the FASB on several key agenda projects.
- The FASB is also working through a simplification initiative. The objective of this initiative is to reduce cost while maintaining or improving the usefulness of information. Projects include narrow scope items that the FASB can complete in the short term such as:
- Eliminating extraordinary items
- Presentation of debt issuance costs
- Balance sheet classification of debt
- Employee and nonemployee share-based payment
- Recently the FASB submitted a future agenda survey to determine the most prevalent topics. The two most popular topics in which financial statement users would like to see improved were financial performance reporting and cash flow classification.
- Congressman James Renacci (Ohio) provided his ongoing efforts in Washington D.C. Currently working on a bill that would allow citizens to view the financial statements of the United States Government. Additionally, further discussed the efforts to allow for 100% depreciation upon purchase of an asset for tax purposes.
- Several tax issues were discussed including:
- The ongoing discussion to increase the requirement to utilize the percentage completion method for tax purposes for contractors from $10 million to $30 million in revenue
- Consideration of removal of the look back requirement
- Accumulated earnings tax for shareholder of C-Corps and S-Corps, and the importance of compensating shareholders a reasonable compensation to avoid penalties from the IRS
RubinBrown will stay up to date on activities from the AGC Financial Issues Committee and other accounting and tax topics and will inform you about changes that will impact you and your business. Please contact your RubinBrown advisor with any questions.
Any federal tax advice contained in this communication (including any attachments): (i) is intended for your use only; (ii) is based on the accuracy and completeness of the facts you have provided us; and (iii) may not be relied upon to avoid penalties.
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