FASB’s Proposal to Simplify Accounting for Income Taxes
On May 14, 2019, the FASB proposed Accounting Standards Update (ASU) to simplify accounting for income taxes. The proposed ASU would remove certain exceptions to the general principles in ASC Topic 740, Income Taxes, as summarized below:
- The removal of the exception to the incremental approach for intraperiod tax allocation when there is a loss from continuing operations and income or a gain from other items.
- The removal of the exception to accounting for basis differences when there are ownership changes in foreign investments.
- The removal of the exception to asserting indefinite reinvestment on a foreign subsidiary that was converted from an equity method investment.
- The exception in recognizing tax benefit in an interim period when year-to-date losses exceed anticipated losses.
- Requiring franchise tax or other taxes attributable to income base to be recognized as income taxes under ASC 740.
- Removal of requirement to allocate consolidated current and deferred tax expense to a non-tax paying entities’ separate financial statement.
- Requiring entities to reflect tax effect of change in tax law or tax rate in the interim period that includes the enactment date as a discrete item, rather than to reflect it in the annual effective rate.
For additional information, please click on the link below:
https://www.fasb.org/jsp/FASB/Document_C/DocumentPage?cid=1176172652976&acceptedDisclaimer=true