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US GAAP provides guidance on the accounting for income taxes in the separate financial statements of an entity that is part of a consolidated tax group.
In December 2019, the FASB issued Accounting Standards Update No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. The ASU provides an accounting policy option under US GAAP that is not addressed in IFRS. ASU 2019-12 is effective for public business entities for annual reporting periods beginning after December 15, 2020, and interim periods within those reporting periods. For all other entities, it is effective for annual periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. Early adoption is permitted in any interim or annual period. If an entity chooses to early adopt, it must adopt all changes as a result of the ASU.
US GAAP
IFRS
The consolidated current and deferred tax amounts of a group that files a consolidated tax return should be allocated among the group members when they issue separate financial statements using a method that is systematic, rational and consistent with the broad principles of ASC 740. An acceptable method is the “separate return” method. It is also acceptable to modify this method to allocate current and deferred income taxes using the “benefits-for-loss” approach.
After adoption of ASU 2019-12, an entity issuing financial statements is not required to allocate income tax expense to a legal entity that is both not subject to tax and disregarded by the taxing authority (e.g., single member LLCs), but an entity may elect to do so. This accounting policy election can be applied on an entity-by-entity basis even if the separate entities are included in the same consolidated income tax return. Prior to adoption of ASU 2019-12, there was no specific guidance on this point.
There is no specific guidance under IFRS on the methods that can be used to allocate current and deferred tax amounts of a group that files a consolidated tax return among the group members when they issue separate financial statements.
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