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Amendments to Subtopic 740-30
Publication date: 18 Dec 2019
us FASB ASU 2019-12
11. Amend paragraph 740-30-25-15 and supersede paragraph 740-30-25-16, with a link to transition paragraph 740-10-65-8, as follows:
Income Taxes—Other Considerations or Special Areas
Recognition
> > Ownership Changes in Investments
740-30-25-15 An investment in common stock of a subsidiary may change so that it is no longer a subsidiary because the parent entity sells a portion of the investment, the subsidiary sells additional stock, or other transactions affect the investment.
If the remaining investment in common stock shall be accounted for by the equity method, the investor shall recognize income taxes on its share of current earnings of the investee entity in accordance with the provisions of Subtopic 740-10.
If a parent entity did not recognize income taxes on its equity in undistributed earnings of a subsidiary for the reasons cited in paragraph 740-3025-17 (and the entity in which the investment is held ceases to be a subsidiary), it shall accrue as a
in the current period expense
income taxes on the temporary difference related to its remaining investment in common stock in accordance with the guidance in Subtopic 740-10.undistributed earnings in the period that it becomes apparent that any of those undistributed earnings (prior to the change in status) will be remitted. The change in the status of an investment would not by itself mean that remittance of these undistributed earnings shall be considered apparent. If a parent entity recognizes a deferred tax liability for the temporary difference arising from its equity in undistributed earnings of a subsidiary and subsequently reduces its investment in the subsidiary through a taxable sale or other transaction, the amount of the temporary difference and the related deferred tax liability will change.
740-30-25-16 Paragraph superseded by Accounting Standards Update No. 201912.
An investment in common stock of an investee (other than a subsidiary or corporate joint venture) may change so that the investee becomes a subsidiary because the investor acquires additional common stock, the investee acquires or retires common stock, or other transactions affect the investment. A temporary difference for the investor’s share of the undistributed earnings of the investee prior to the date it becomes a subsidiary shall continue to be treated as a temporary difference for which a deferred tax liability shall continue to be recognized to the extent that dividends from the subsidiary do not exceed the parent entity’s share of the subsidiary’s earnings subsequent to the date it became a subsidiary.
12. Amend paragraph 740-30-45-3, with a link to transition paragraph 740-10-65-8, as follows:
Other Presentation Matters
> Undistributed Earnings of Subsidiaries and Corporate Joint Ventures
740-30-45-3 If a parent entity did not recognize income taxes on its equity in undistributed earnings of a subsidiary for the reasons cited in paragraph 740-30-25-17 and the entity in which the investment is held ceases to be a subsidiary, paragraph 740-30-25-15 requires that it shall accrue
as a
in the current period expense
income taxes on the temporary difference related to its remaining investment in common stock in accordance with the guidance in Subtopic 74010undistributed earnings in the period that it becomes apparent that any of those undistributed earnings prior to the change in status will be remitted
. Copyright #year# by Financial Accounting Foundation, Norwalk, Connecticut.
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