FASB has issued a proposed Accounting Standards Update (ASU) intended to reduce cost and complexity for the accounting for income taxes. Stakeholders are asked to comment on the proposal by June 28, 2019.
The proposal would remove specific exceptions to the general principles in Topic 740 — Income Taxes in Generally Accepted Accounting Principles (GAAP). The proposed ASU eliminates the need for an organization to analyze whether the following apply in a given period:
Exception to the incremental approach for intraperiod tax allocation
Exceptions to accounting for basis differences when there are ownership changes in foreign investments, and
Exception in interim period income tax accounting for year-to-date losses that exceed anticipated losses.
The proposed ASU also would improve financial statement preparers’ application of income tax-related guidance and simplify GAAP for:
Franchise taxes that are partially based on income
Transactions with a government that result in a step up in the tax basis of goodwill
Separate financial statements of legal entities that are not subject to tax, and
Enacted changes in tax laws in interim periods.