Income Taxes

The objective of the project is to reduce the differences between IAS 12 Income Taxes and the US standard, SFAS 109 Accounting for Income Taxes, and related US GAAP. It was added to the Board’s agenda in September 2002.

Is this project part of the Memorandum of Understanding?

Yes, this project forms part of the Memorandum of Understanding between the IASB and the FASB which sets out a Roadmap of Convergence between IFRSs and US GAAP 2006-2008.

Click here for more information on the MoU.

Next due process step

An Exposure Draft of an IFRS to replace IAS 12 is expected to be published by the IASB in 2008. A standard is planned to be finalised in 2010. The FASB has suspended indefinitely deliberations on the Income Tax project. The FASB has no plans to issue an amendment to Statement 109 at this time. The FASB may revisit this project after the IASB further develops its replacement to IAS 12, Income Taxes.

Due process steps completed

Stage 1: Setting the agenda

The project was added to the agenda in September 2002.

Stage 2: Project Planning

This project has been conducted as a joint IASB and FASB project. Both IAS 12 and SFAS 109 Accounting for Income Taxes are based on the balance sheet liability approach whereby an entity recognises deferred tax assets and liabilities for temporary differences (differences between the carrying amount of an asset or liability in the balance sheet and its tax base) and for operating loss and tax credit carryforwards. However, differences arise because both Standards have numerous exceptions to the basic principle. The Boards’ approach to convergence in this project is not to reconsider the underlying approach, but rather to eliminate exceptions to the basic principle. The project is part of the short-term convergence project, therefore no working group was considered necessary for this project.

Stage 3: Development and publication of a discussion paper

A discussion paper is not a mandatory step in the IASB Due Process Handbook. A discussion paper was not considered necessary for this project because the objective of the project is to reduce differences between IAS 12 and SFAS 109, not to develop a new approach to accounting for income taxes.

Estimated project completion

The current project plan envisages that a final standard will be issued in 2010.