ASC 740, Income Taxes, and IAS 12, Income Taxes, require entities to account for both current tax effects and expected future tax consequences of events that have been recognized (i.e., deferred taxes) using an asset and liability approach. Deferred taxes for temporary differences arising from non-deductible goodwill are not recorded under both US GAAP and IFRS, and tax effects of items accounted for directly in equity during the current year are allocated directly to equity.
Neither US GAAP nor IFRS permits the discounting of deferred taxes.
Other differences include: (i) the allocation of subsequent changes to deferred taxes to components of income or equity, (ii) the calculation of deferred taxes on foreign nonmonetary assets and liabilities when the local currency of an entity is different than its functional currency, (iii) the measurement of deferred taxes when different tax rates apply to distributed or undistributed profits and (iv) the recognition of deferred tax assets on basis differences in domestic subsidiaries and domestic joint ventures that are permanent in duration.
While the Boards have abandoned plans for a joint convergence project, the IASB may consider a fundamental review of the accounting for income taxes as part of its agenda consultation process during 2012.
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