FASB to seek feedback on accounting for income taxes

FASB plans to ask financial statement users, preparers, auditors, and others for feedback on how to best address concerns about its standard on accounting for income taxes.

The board also plans to ask stakeholders whether addressing those concerns should be a priority in comparison to other projects that could be undertaken to improve U.S. GAAP, FASB Chairman Russell Golden said in a letter to John Davidson and Cynthia Eisenhauer, co-chairs of the Financial Accounting Foundation (FAF) Standard-Setting Process Oversight Committee.

Golden’s letter was written in response to a FAF post-implementation review that concluded that the standard adequately resolved the issues it was meant to resolve, but may not have reduced complexity associated with accounting for income taxes.

FASB noted that the review showed that preparers and auditors find certain aspects of FASB Statement No. 109, Accounting for Income Taxes, to be operationally challenging. Those aspects include:

• Intraperiod tax allocation;
• Intercompany transfer of assets; and
• Situations in which a deferred tax liability is not recognized for temporary differences related to earnings determined to be indefinitely reinvested in foreign subsidiaries.

The board also acknowledged that the review found that the information resulting from the standard may not be detailed enough for users to analyze the cash flows associated with income taxes or to analyze earnings determined to be indefinitely reinvested in foreign subsidiaries.

In addition to soliciting feedback, FASB will continue to analyze the post-implementation review report, according to Golden’s letter.

—Ken Tysiac (ktysiac@aicpa.org) is a JofA senior editor.