Industry Insights

Simplifying Income Tax Accounting

February 2015

The Financial Accounting Standards Board, as part of its simplification initiative, issued two proposed accounting standards updates to U.S. generally accepted accounting principles income tax rules—for intra-entity asset transfers and balance sheet classification requirements for deferred taxes. The proposals, “Intra-Entity Asset Transfers” and “Balance Sheet Classification of Deferred Taxes,” would amend Accounting Standards Codification Topic 740 (formerly FAS 109), Income Taxes. The first would require entities to account for the tax effects of an intra-entity transfer of assets when the transfer occurs, while the second would require classification of all deferred tax liabilities and assets as noncurrent. If endorsed, the standards would be effective for periods beginning after December 15, 2016, for public business entities; all other entities would have an additional year to adopt the guidance. Early adoption is permitted.

In addition to simplifying accounting for income taxes, the proposed updates would align the recognition of income tax consequences of intra-entity asset transfers and the presentation of deferred income tax assets and liabilities with International Financial Reporting Standards.

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