FASB RESPONDS TO POST-IMPLEMENTATION REVIEW OF
STATEMENT 109 ON INCOME TAXES
Norwalk, CT, December 3, 2013—The Financial Accounting Standards Board (FASB) today released its response to the Post-Implementation Review (PIR) of its standard on accounting for income taxes.
The review, conducted by the FASB’s parent organization, the Financial Accounting Foundation (FAF), examined FASB Statement No. 109, Accounting for Income Taxes, (codified in Accounting Standards Codification Topic 740, Income Taxes). The standard requires organizations that prepare U.S. GAAP financial statements to recognize the amount of a) taxes payable or refundable for the current year, and b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in the organization’s financial statements or tax returns.
In its response, the FASB acknowledged the PIR findings that Statement 109 adequately resolved the issues underlying its stated need but that Statement 109 may not have reduced complexity associated with accounting for income taxes. Specifically, the FASB noted that preparers and auditors find certain aspects of Statement 109 to be operationally challenging, including intraperiod tax allocation, intercompany transfer of assets, and situations in which a deferred tax liability is not recognized for temporary differences related to earnings determined to be indefinitely reinvested in foreign subsidiaries.
The FASB also acknowledged the PIR finding that, while information resulting from the application of Statement 109 provides investors with decision-useful information, the information may not be detailed enough for users to analyze the cash flows associated with income taxes and to analyze earnings determined to be indefinitely reinvested in foreign subsidiaries.
The FASB said it would continue to analyze the findings in the PIR report, including asking for input from financial statement users, preparers, auditors, and others. The objective of the outreach is to understand stakeholders’ specific concerns and determine whether there are any cost-effective solutions to address the concerns. The FASB also plans to understand stakeholders’ views about the priority of addressing those concerns relative to the other projects the Board could undertake to enhance U.S. GAAP.
The FASB’s full response to the Statement 109 PIR report is available on the FAF website. More information on the FAF’s PIR process can be found on the FAF website.
About the Financial Accounting Foundation
The FAF is responsible for the oversight, administration, and finances of both the Financial Accounting Standards Board (FASB) and its counterpart for state and local government, the Governmental Accounting Standards Board (GASB). The Foundation is also responsible for selecting the members of both Boards and their respective Advisory Councils.
About the Financial Accounting Standards Board
Since 1973, the Financial Accounting Standards Board has been the designated organization in the private sector for establishing standards of financial accounting and reporting. Those standards govern the preparation of financial reports and are officially recognized as authoritative by the Securities and Exchange Commission and the American Institute of Certified Public Accountants. Such standards are essential to the efficient functioning of the economy because investors, creditors, auditors, and others rely on credible, transparent, and comparable financial information. For more information about the FASB, visit our website at www.fasb.org.