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U.S. GAAP: Accounting for Income Taxes |
IFRS: Accounting for Income Taxes |
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Comprehensive interperiod allocation using liability method (statement of financial position orientation) required under U.S. GAAP
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Comprehensive interperiod allocation using liability method (statement of financial position orientation) required under IFRS, very similar to U.S. GAAP |
| Exemptions from interperiod allocation rules found under IFRS not present under U.S. GAAP |
Exemptions provided for nontaxable goodwill, certain asset/liability acquisitions that are not business combinations and that do not immediately affect book or tax income, and permanent differences
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Tax effects of all temporary differences are recognized, subject to allowance for tax assets that are not “more likely than not” to be realized |
Tax effects of all temporary differences are recognized, subject to allowances for tax assets that are not “more likely than not” to be realized
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Recognize effect of rate changes when enacted
Prohibits recognition of effects of temporary differences related to
1. Foreign currency nonmonetary assets when the reporting currency is the functional currency, and
2. Intercompany transfers of inventory or other assets remaining within the company
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Recognize effects of rate changes when “substantively enacted” which may precede U.S. GAAP recognition |
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Deferred tax assets and liabilities are current or noncurrent based on related asset or liability, net current and net noncurrent amounts are displayed
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Deferred tax assets and liabilities are noncurrent, and are to be reported net |
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Post-business-combination recognition of deferred tax asset eliminates goodwill, then other intangible assets, with any excess taken to income
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Post-business-combination recognition of deferred tax asset eliminates goodwill with any excess taken to income |
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Several specific exemptions to general requirement to provide deferred tax on all tem-porary differences are set forth
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No exceptions to general principle that all temporary differences in carrying amount of assets and liabilities require deferred taxes |
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Recognize deferred tax asset in all cases, provide reserve when realization is not “more likely than not”
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Recognize deferred tax asset when realization is probable, which means “more likely than not” per IFRS 3 |
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Effect of change in rates or change in assessed likelihood of realization on deferred tax related to item originally recognized in stockholders’ equity must be reported in current earnings
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Effect of change in rates or change in assessed likelihood of realization on deferred tax related to item originally recognized in stockholders’ equity must be reported in equity using ‘backward tracing’ (may soon be changed to conform with U.S. GAAP method) |
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Subsequent year realization of tax benefit from business combination reduces goodwill, then other tangible assts, and only then excess reported in current earnings
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Subsequent year realization of tax benefit from business combination reduces goodwill, then excess reported in current earnings |
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Rate reconciliation based on domestic federal rate time pretax profit from continuing operations only
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Rate reconciliation based on applicable rates times accounting profit |
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Tax effect of intercompany transactions recognized at seller entity’s tax rate
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Tax effect of intercompany transactions recognized at buyer entity’s tax rate |
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Benefit of uncertain tax positions can only be recognized to the extent that there is at least a 50% likelihood of being sustained on exam
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No specific guidance on uncertain tax positions (apply general approach for contingent losses); based on management expectations
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