The staff has prepared this summary of Board decisions for information purposes only. Those Board decisions are tentative and do not change current accounting. Official positions of the FASB are determined only after extensive due process and deliberations.
Project Objective
Decisions Reached at the Last Meeting
Summary of Decisions Reached
*Next Steps
Board Meeting and Public Meeting Dates
Related FASB Articles
Background Information
Contact Information
Decisions Reached at the Last Meeting
View the FASB Action Alert for a summary of decisions reached at the December 5, 2007 meeting.
In June 2006, the Board issued FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, which is an interpretation of Statement 109. The objective of that Interpretation is to clarify accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with Statement 109. FIN 48 applies a recognition threshold to tax uncertainties and requires that deductions that meet the recognition threshold be measured at a single point best estimate. View Interpretation 48. The IASB has tentatively decided to amend IAS 12 to clarify accounting for uncertainty in income taxes. The IASB’s tentative decision will require entities to measure the current and deferred tax consequences of uncertainties related to tax positions based on the expected outcome (the probability weighted average of the possible outcomes).
The income tax project will not consider the following:
These items will be considered in a current or future agenda project that is more closely associated with these differences
Recognition
The Board addressed the following topics regarding the recognition of deferred tax assets and liabilities:
Opinion 23: Unremitted Earnings of Foreign Subsidiaries and Corporate Joint Ventures.
Due to the practical complexities of calculating the amount of deferred taxes for the unremitted earnings of foreign subsidiaries and joint ventures, the Boards will retain the exceptions in IAS 12 and Statement 109 for the recognition of deferred tax liabilities for certain investments in foreign subsidiaries (or foreign corporate joint ventures). The IASB will amend the language in IAS 12 to make it similar to that in Statement 109 and Opinion 23 with respect to unremitted foreign earnings. The Boards also requested that the staff evaluate whether improvements could be made to the disclosure requirements for unremitted earnings of foreign subsidiaries and joint ventures.
The Boards received three unsolicited comment letters on the exceptions for foreign unremitted earnings of foreign subsidiaries and foreign corporate joint ventures.
Intercompany Transfers and Foreign Currency Translation
The Board will eliminate the following two exceptions to the comprehensive recognition of deferred taxes in paragraph 9 of Statement 109:
The Boards received one unsolicited comment letter concerning intercompany transfers and foreign currency exceptions.
Acquired Temporary Differences in Asset Acquisitions (EITF Issue No. 98-11, "Accounting for Acquired Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business Combinations")
The Board decided that acquired temporary differences in asset acquisitions other than a business combination should be accounted for as follows:
Business Combinations
The Board decided to retain the guidance in Statement 109 by continuing to prohibit the recognition of a deferred tax liability for the portion of goodwill for which amortization is not deductible for tax purposes.
Change in Tax Status
The Board decided to amend paragraph 28 of Statement 109 to explicitly include the current tax consequences of an entity’s change in tax status. This change will be consistent with guidance provided in SIC Interpretation 25, Income Taxes—Changes in the Tax Status of an Entity or its Shareholders. The proposed change is not intended to change current practice.
Initial and Subsequent Measurement
The Board addressed the following topics regarding the measurement of deferred tax assets and liabilities:
Different Rate Depending on Whether an Entity Distributes Earnings to Owners
In certain jurisdictions, an entity’s taxable income is taxed at different rates, depending on whether income is distributed to owners or retained by the entity. In other jurisdictions, an entity is provided a deduction from taxable income for dividends paid to owners. In these situations, the Board decided to require an entity to use the distributed rate to measure tax assets or liabilities if the entity expects to distribute income to owners and has the ability to do so. In all other cases, entities are required to use the undistributed rate. This decision revises a previous tentative decision that would have required an entity to use the undistributed rate, unless an obligation to distribute existed.
Change in Tax Law or Rate
For operations within U.S. taxing jurisdictions, the Board will retain the Statement 109 guidance that requires entities to recognize the effect of the change in tax laws or rates in the period of enactment. For operations other than U.S. taxing jurisdictions, the Board will amend Statement 109 to require the use of an approach that is consistent with International Financial Reporting Standards (IFRS). The IFRS approach requires that deferred tax assets and liabilities be measured based on tax rates (and tax laws) that have been enacted (or substantively enacted) by the balance sheet date.
Definition of Tax Basis
The Board decided to include a definition of the term tax basis in FASB Statement No. 109, Accounting for Income Taxes. The definition will be based on the tentative definition that the IASB adopted, with some modification. The IASB is expected to revisit the proposed change to the definition in IAS 12, Income Taxes, at a future date. The definition is not intended to change current practice.
Realizability of Deferred Taxes
The Board decided to retain terminology currently contained in Statement 109 about the realizability of deferred tax assets. The IASB tentatively decided to amend IAS 12 to converge to Statement 109’s valuation allowance approach but plans to use different terms to describe that approach than those in Statement 109. The FASB decided not to amend the terminology in Statement 109 to converge with the proposed changes to IAS 12. The Board reiterated that, with the proposed changes to IAS 12, the revised IAS 12 and Statement 109 will both use the same approach to assess the realizability of deferred tax assets.
Presentation and Disclosure
Intraperiod Tax Allocation
The Boards decided the following:
Disclosure
The Board considered certain differences between the disclosure requirements in Statement 109 and IAS 12 and decided to amend the disclosure requirements in Statement 109 as follows:
The Board decided not to require additional disclosures about the nature and amount of undistributed earnings of foreign subsidiaries.
Transition and Effective Date
The Board tentatively decided the following:
Board Meeting and Public Meeting Dates
| December 5, 2007 | Board Meeting—Sweep Issues, Distributed vs. Undistributed Tax Rates, Transition and Effective Date |
| January 31, 2007 | Board Meeting—Assets acquired with temporary differences and non-deductible goodwill |
| October 24, 2005 | Board Meeting—Distributed vs. Undistributed Tax Rates |
| June 15, 2005 | Board Meeting—Disclosures |
| April 21, 2005 | Joint Board Meeting—Intraperiod Tax Allocation |
| March 23, 2005 | Board Meeting—Recognition and Measurement of Deferred Taxes |
| January 19, 2005 | Board Meeting—Recognition and Measurement of Deferred Taxes |
| December 15, 2004 | Board Meeting—Intercompany Transfers and Foreign Currency Exceptions |
| October 20, 2004 | Joint Board Meeting—Foreign Unremitted Earnings Exceptions |
| September 23, 2004 | FASAC Meeting Handout |
| July 27, 2004 | Board Meeting—Opinion 23 and Steamship Enterprise Exceptions |
| April 22, 2004 | Joint Board Meeting—Discussion of Acquired Temporary Differences in Asset Acquisitions (Issue 98-11) |
| March 16, 2004 | Board Meeting—Discussion of Scope and Initial Project Activities |
"Developing Consistent Application of Similar Principles of Accounting for Income Taxes," The FASB Report, No. 257, June 30, 2004.
Differences between U.S. GAAP and IFRS principally arise for the following reasons:
For these reasons, the FASB identified income taxes as a topic for its short-term convergence project. The FASB and IASB are sharing staff resources and research and working to coordinate the eventual issuance of their Exposure Drafts and final standards. The Boards deliberate individually and vote on each issue. At any given time, one Board may have reached a tentative conclusion on some issues that the other Board has not yet deliberated. Details on the IASB’s decisions to date are available on its website at www.iasb.org