CAPTIVE INSIGHT
for the reversal of tax effects related to the unrealised gain/loss that were a component of
accumulated other comprehensive income (“AOCI”). This meant that the difference in tax
rates would remain stranded as a component of AOCI. To many tax accounting professionals,
this felt very strange. Fortunately, the Financial Accounting Standards Board recognised this
issue and swiftly acted by issuing Accounting Standard Update 2018-2. This update, effective
for years beginning after December 15, 2018, requires companies to reverse those stranded
tax effects through net income. This is additionally confusing because originally those tax
effects did not go through net income. With early adoption permitted, many companies took
advantage and reclassified those stranded tax effects during the 2017 year.
« CONCLUSION
THIS HAS HAD A DRAMATIC
IMPACT ON NCFC’S AS MANY
RETAIN SIGNIFICANT ASSET
HOLDINGS AS EARNINGS HAVE
BEEN DEFERRED OVER THE
YEARS AND WERE NOT
YET SUBJECT TO TAX.
In summary, tax reform certainly has
impacted the way businesses operate
globally. This was the expectation
when the law was passed. While
there were certain provisions that
had a direct impact on Cayman and
other offshore domiciles, the captive
insurance industry should not see
overwhelming change. Cayman
remains an attractive domicile option
for new captives with much to offer.
/cayman.finance.com