The project was added to the agenda in September 2002.

Project Planning

This project started 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.

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 clarify and improve IAS 12 and reduce differences between IAS 12 and SFAS 109, not to develop a new approach to accounting for income taxes.

Development and publication of an exposure draft

In 31 March 2009, the Board issued an Exposure Draft of an IFRS to replace IAS 12 on Accounting for Income Taxes. Click here for a copy of the exposure draft.

The main effect of the proposed amendments would be to eliminate or reduce the existing exceptions to the balance sheet liability approach including initial recognition exception and exception for investments in subsidiaries, add requirements on uncertain tax positions based on the probability weighted average of all possible outcomes and align requirements on intra-period allocation with US GAAP (alternative view for the intra-period allocation is also included in the exposure draft). Click here for a short presentation material on the exposure draft.

The comment period for the exposure draft ended on 31 July 2009. Click here to view the comment letters.

Expected project completion

A standard is planned to be finalised in 2010.