Search within this section
Select a section below and enter your search term, or to search all click IFRS and US GAAP: similarities and differences
Favorited Content
8.19 Accounting considerations of certain aspects of US tax law
Publication date: 31 Mar 2023
us IFRS & US GAAP guide
The Tax Cuts and Jobs Act of 2017 (the 2017 Act) significantly changed many provisions of US tax law. In response, the FASB staff issued several FASB Staff Q&As that address accounting for certain aspects of the 2017 Act under US GAAP. Since the FASB guidance is applied only to entities under US GAAP, the accounting impact of the provisions of the 2017 Act discussed in this section could be different between IFRS and US GAAP.
8.19.1 Base erosion anti-abuse tax (BEAT)
The 2017 Act introduced a new minimum tax on certain international intercompany payments as a means to reduce the ability of multi-national companies to erode the US tax base through deductible related-party payments. The minimum tax, known as BEAT, is imposed when the tax calculated under BEAT exceeds an entity’s regular tax liability determined after the application of certain credits allowed against the regular tax.
US GAAP |
IFRS |
The FASB staff concluded that temporary differences should be measured at regular statutory tax rates versus considering the impact of BEAT in determining the rate expected to apply. Therefore, the effects of BEAT should be recognized as a period cost when incurred versus being considered in the measurement of deferred taxes.
|
No specific guidance related to BEAT exists under IFRS. It would be acceptable for an entity to measure deferred taxes at the regular statutory tax rate and account for the effects of BEAT in the year in which they are incurred.
|
The FASB staff also concluded that an entity does not need to evaluate the effect of potentially paying the BEAT tax in future years on the realization of deferred tax assets. While not required, we believe that companies may elect to do so. |
There is no similar guidance under IFRS on the potential impact of BEAT on the realizability of deferred tax assets. |
8.19.2 Global intangible low-taxed income (GILTI)
The 2017 Act introduced a new tax on certain global intangible low-taxed income (GILTI) of a US shareholder’s controlled foreign corporations. The GILTI inclusion will be part of the entity’s taxable income for US tax purposes each year.
US GAAP |
IFRS |
The FASB staff concluded that an entity that is subject to GILTI must make an accounting policy election to either treat GILTI as a period cost, or to record deferred taxes for basis differences that are expected to reverse as GILTI in future years. |
It would be acceptable to recognize any taxes for GILTI as a period cost when GILTI is included on the tax return. It would also be acceptable to reflect the impact of the GILTI inclusion in the tax rate used to measure deferred taxes for temporary differences expected to reverse as GILTI. Judgment will be required to determine which approach is more appropriate.
|
8.19.3 Foreign derived intangible income (FDII)
The 2017 Act introduced an additional deduction for US companies that produce goods and services domestically and sell them abroad, known as foreign derived intangible income (FDII).
US GAAP |
IFRS |
We believe that FDII should be accounted for as a special deduction. Under US GAAP, special deductions are recognized in the period in which they are included in the tax return, instead of being reflected in the measurement of deferred taxes (refer to SD 8.9). |
IFRS does not address special deductions. It would be acceptable to recognize FDII in the period in which the deduction is included in the tax return. It might also be acceptable to reflect the impact in the measurement of deferred taxes on temporary differences that will be subject to FDII upon reversal. |
PwC. All rights reserved. PwC refers to the US member firm or one of its subsidiaries or affiliates, and may sometimes refer to the PwC network. Each member firm is a separate legal entity. Please see www.pwc.com/structure for further details. This content is for general information purposes only, and should not be used as a substitute for consultation with professional advisors.
Link copied
