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Income Taxes Ifrs/Gaap

In: Business and Management

Submitted By amaugust
Words 1308
Pages 6
International Accounting
Accounting for income taxes
IAS 12

1

Executive summary


Despite the similar approaches to accounting for taxation under IFRS and US
GAAP, deferred taxation is one of the most common areas where differences arise. The reason is that a high proportion of transactions recognized in either the statement of income or balance sheet will have consequential effects on deferred taxes.



US GAAP, deferred tax asset is recognized in full. It is then reduced by a valuation account if it is more likely than not that all or a portion of the deferred tax asset will not be realized. IFRS requires a one-step approach that provides for recognition of the deferred tax assets only to the extent it is probable that they will be realized.

2

Executive summary


IFRS classifies deferred tax assets and liabilities as noncurrent in a classified balance sheet while US GAAP classifies these items based on the classification of the related asset or liability, or for tax losses and credit carryforwards, based on the expected timing of realization.



IFRS offsets deferred tax assets and liabilities when specific conditions are met which includes when an entity has a legally enforceable right to offset and when the taxes are levied by the same taxing authority for the same taxable entity. US
GAAP offsets these balances and reports them net by current and noncurrent classification. 3

Primary pronouncements
US GAAP

IFRS



• IAS 12, Income Taxes

ASC740, Income Taxes

• IAS 37, Provisions, Contingent
Liabilities and Contingent
Assets

4

General
US GAAP
Takes an asset-liability approach to accounting for income taxes and thus records deferred tax assets and liabilities. IFRS

Similar

5

Temporary differences
General

US GAAP

A temporary difference is the difference
between…...

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