Strategizing International Tax Best Practices – by Keith Brockman

Posts tagged ‘ASC 740’

TEI”s comments: accounting for BEAT/GILTI/FDII

The Tax Executives Institute, Inc. (TEI) previously issued excellent comments regarding divergent views of the Big 4 accounting firms for US GAAP tax accounting issues for the new US Tax Act aspects.

These views are still divergent today as we approach the end of March, and further issues continue to develop that impact the cash tax and tax reporting aspects for the US Tax Act.  Accordingly, the same facts may provide a different repatriation tax liability and tax accounting for different multinational companies, certainly a difficult variable for comparison by tax experts and, most importantly, by investors.

As these positions may continue to diverge, position papers and discussions with the audit firm, Audit Committee of the Board of Directors and the company should be scheduled to ensure there are no surprises as earning release dates are emerging.  

Click to access TEI%20Letter%20re%20ASC%20740%20treatment%20of%20BEAT%20and%20GILTI.pdf

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Tax Risk Management

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US Accounting Standards

The Tax Executives Institute (TEI) has provided comments to the FASB’s proposed changes to disclosure requirements for the reporting of income taxes.  As the increased transparency demands continue, the attached views exemplify the theoretical and practical considerations for new standards re: added benefits for the readers of financial statements.

As the world of tax increases in complexity, public disclosures should avoid subjective and forward looking projections, as well as avoiding any potential conflicts with strategic forecasts and confidential information.

TEI’s comments are well written and should be welcomed by the tax and financial community looking to increase the transparency and practicality of financial statement times without duplication or non value-added actions.

Click to access Comment-Letter-on-Proposed-Updates-to-ASC-740-Disclosures-PostedJan122017.pdf

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Tax Risk Management

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UK Diverted Profits Tax: Accounting implications

The PwC summary, referenced herein, summarizes the UK Diverted Profits Tax (DPT) proposal.  Additionally, it highlights the effect upon the current year tax provision, including the relevant deferred tax adjustment that includes the date of enactment (26 March 2015).

Click to access pwc-financial-reporting-implications-new-uk-diverted-profits-tax.pdf

US GAAP / IFRS considerations:

  • Align with the auditor if the DPT qualifies as an “income tax” subject to US GAAP ASC 740 and IAS 12, Income Taxes under IFRS.
  • Determine if DPT is applicable (although such notification for DPT to HMRC is not due for six months).
  • Review adjustments for deferred taxes.
  • Calculate any effect for the current year effective tax rate.
  • Determine if tax reserves should be established.
  • Review footnote disclosures for DPT impact.
  • For new APAs, note that the DPT position will be considered first.  This will require extensive documentation for the DPT position as well as the APA submission.

As this controversial legislation was passed less than 30 days ago, there will be a time constraint for determination of the tax accounting impact since any DPT notification and preparation of extensive documentation relevant for HMRC review is now commencing.

Note the tax accounting considerations apply to any new tax legislation, thus the above considerations will apply for similar measures related to new income tax legislation, including BEPS proposals and possibly the Australian DPT equivalent.

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Transfer Pricing

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