FASB Codification sources used December 31, 2013
As of 12/31/13, what amount, if any, of sales taxes due should be recognized in eVade's financial statements? What effect, if any, does eVade's decision to participate in the tax amnesty program have on the amount recognized as of March 31, 2014?
Sales Tax Situation
How do we report?
Change in Estimate or Correction in Error June 15, 2014
What amounts should be recognized in the financial statements for the $25 million payment on June 15, 2014?
When do we recognize and for what amount?
No brick-and-mortar store presence
Operates distribution centers in all 50 states including state X Presence in State X
Has not previously collected nor remitted to State X
Risk of detection not probable
March 15, 2012 program established
Provides any unregistered taxpayer who voluntarily registers to collect sales tax on a prospective basis will be forgiven: 1) 50% of all unpaid sales tax and 2) all interest and penalties on unpaid taxes Amounts
As of 12/31/13 estimates
$50 million in sales taxes owed
$6 million in interest
$4 million in penalties
6/15/14 agrees to participate in program and pays owed $25 million
Correction of Error
FASB ASC 250-10-20
"An error in recognition, measurement, presentation, or disclosure in financial statements resulting form mathematical mistakes, mistakes in the application of generally accepted accounting principles (GAAP), or oversight or misuse of facts that existed at the time the financial statements were prepared." "Oversight of facts"
eVade was not aware until the tax amnesty program was announced 3/15/14
Had deemed detection to be not probable, but still had previously estimated amounts How to report?
We recommend Correction of Error
FASB ASC 250-10-45-24
"Those items that are reported as error corrections shall, in single period statements, be...