As part of a simplification initiative, the Financial Accounting Standards Board (‘FASB’) issued an exposure draft of two proposed Accounting Standard Updates (‘ASUs’) relating to the accounting for income taxes of the following items:
- Intra-Entity Asset Transfers
Currently the buyer and the seller involved in intra-entity asset transfers are generally required to defer the income tax consequences of the intra-entity asset transfer when profits of such transfers are eliminated in consolidation. This ASU proposes in its exposure draft that the tax seller’s tax expense on the profit and the buyer’s deferred tax benefit on the increased tax base relating to the transfer of assets should be recognized at the time the transfer occurs.
- Balance Sheet Classification of Deferred Taxes
This ASU proposes that the deferred taxes for each tax-paying entity should no longer be presented as either net current asset/liability or net non-current asset/liability, and instead suggests a simplified presentation by classifying all deferred tax assets/liabilities as non-current on the balance sheet.
PwC drafted an article that briefly discusses the content of the proposed ASUs and their importance, and the way forward. This article can be consulted by clicking here.
The full version of the exposure draft can be consulted on the FASB’s website by clicking here.
The comment period for the exposure draft ends on 29 May, 2015.