The Financial Accounting Standards Board has indefinitely suspended deliberations on its project to improve the accounting for income taxes and merge U.S. standards with international ones in this area, according to Crain's Financial Week.
The U.S. standards-setter suspended deliberations on the income tax project on Aug. 12, saying that it may revisit the project after its international counterpart, the International Accounting Standards Board, further develops its replacement for IAS 12, the international standard for income taxes.
As a result, “there’s no current plan to amend FAS 109 [the U.S. standard for income taxes],” Ken Kuykendall, U.S. IFRS tax leader at PricewaterhouseCoopers, said today during a webcast on accounting for income taxes under IFRS.
Nevertheless, “we would clearly expect the two boards will continue to work together,” said Jennifer Spang, U.S. IFRS tax partner at PwC, adding, “FASB will be a constituent.”
Broadly speaking, U.S. and international standards to account for income taxes are very similar in the sense that they both take a balance sheet approach and include deferred taxes.
But there are some differences in the application of the standards. In addition, IFRS tax accounting differs on stock-based compensation, intercompany transfers and the way deferred taxes are recorded. Such disparities will have to be reconciled—and it remains to be seen whether the U.S. or international interpretation will prevail.
Ultimately, however, the IASB will decide the issue.
“At the end of the day, it’s the IASB holding the pen on it and taking the final decision,” Tony de Bell, global accounting consulting services partner at PWC, said during the webcast.
Mr. de Bell noted that IASB is expected to issue an exposure draft on accounting for income taxes in the fourth quarter, which would be followed by a comment period likely to last about 120 days, into the first or second quarter of next year. Mr. de Bell said he doesn’t expect final standards until late 2009 or 2010.
The Securities and Exchange Commission is set to issue a draft rule before Sept. 1 on when U.S. companies would transfer from U.S. GAAP to International Financial Reporting Standards. The commission may allow optional early adoption of IFRS standards for some qualifying companies as early as 2009 or 2010. A date for mandatory adoption could come later.
Standards related to income taxes may change even after early adopters in the U.S. move to IFRS.
Either way, Mr. de Bell recommends that all companies “get involved in the debate in the same way as if FASB had issued an exposure draft.”
“The process is pretty similar to what you’re used to in the U.S.,” he added.
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