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8.10 Taxes – intercompany transfers of inventory
Publication date: 31 Mar 2023
us IFRS & US GAAP guide
The frameworks require different approaches when current and deferred taxes on intercompany transfers of inventory are considered.
US GAAP | IFRS |
For purposes of the consolidated financial statements, any tax impacts to the seller as a result of an intercompany sale or transfer of inventory are deferred until the asset is sold to a third-party or otherwise recovered (e.g., written down).
In addition, the buyer is prohibited from recognizing a deferred tax asset resulting from the difference between the tax basis and consolidated carrying amount of the inventory.
| There is no exception to the model for the income tax effects of transferring assets between the entities in the consolidated groups. Any tax impacts to the consolidated financial statements as a result of the intercompany transaction are recognized as incurred.
If the transfer results in a change in the tax base of the asset transferred, deferred taxes resulting from the intragroup sale are recognized at the buyer’s tax rate.
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