Table of Contents. Acknowledgements. Foreword. vii. Chapter 1: Introduction to Tax Accounting Tjeerd van den Berg and Alycia Spitzmueller 1

Transcription

1 Acknowledgements Foreword v vii Chapter 1: Introduction to Tax Accounting Tjeerd van den Berg and Alycia Spitzmueller Introduction Importance of accounting for income taxes Primary tax accounting terminology How are income taxes accounted for? Other factors affecting tax reporting: Looking beyond the accounting requirements Introduction Non-regulatory pressure and other media coverage Introduction Corporate social responsibility Fair share Publish What You Pay Non-governmental organizations Regulatory changes and proposals Introduction Country-by-country reporting The Extractive Industries Transparency Initiative The US Dodd-Frank Act EU directive on accounting and transparency EU Capital Requirements Directive OECD Guidelines Conclusion International Financial Reporting Standards Introduction Why are International Financial Reporting Standards developed? The convergence project What is the IASB? IFRS Foundation 38 ix

2 IFRS Foundation trustees IFRS Foundation monitoring board IFRS advisory council IFRS Interpretations Committee Accounting Standards Advisory Forum Financial reporting standards Introduction The due process of IFRS The due process of IFRIC interpretations Conclusion 45 Chapter 2: Definition of Income Taxes Prof. Dr. Eva Eberhartinger and Alexandra Patloch Scope of IAS Income taxes in the statements and analysis Income taxes Specific forms of taxation Income tax Withholding tax Business tax Tonnage tax Mining tax Interest payments and penalties Alternative minimum taxes Tax on value added Tax beyond the scope of IAS Differences between IFRS and US GAAP 61 Chapter 3: Book-to-Tax Differences: Permanent and Temporary David Chopping Introduction Tax returns and financial statements Adjustment of profit for tax purposes and the performance statements Reconciliation of IFRS, national GAAP and group accounts Manner of recovery of assets 74 x

3 Chapter 4: Current Tax and Prior Year Adjustments Terry Tam and Timothy Hale Introduction The process Calculate current tax for the year Calculate taxable income for the year Tax rates Tax incentives Uncertain tax positions Tax loss carry-back claims Calculate any prior year adjustments Prior year adjustments Change in accounting estimate vs. error Reconcile tax accounts Introduction Balance sheet classification Discounting Conclusion 100 Chapter 5: Deferred Taxes Ronel Buys Introduction Overview of deferred tax assets and liabilities Recognition Measurement Presentation Practical approach to calculating deferred tax Basic principles of carrying amount Tax base as the basis for calculating deferred tax Tax base of an asset Tax base of a liability Tax base of revenue received in advance Uncertainty in determining the tax base Tax base without a carrying amount Calculate the temporary differences Temporary difference Taxable temporary differences Assets Liabilities 118 xi

4 Other examples of taxable temporary differences Deductible temporary differences Assets Liabilities Other examples of deductible temporary differences Other examples of temporary differences Recognition criteria and initial recognition exemptions Initial recognition exemption Initial recognition of goodwill exempted from deferred tax Exemption from recognizing outside basis deferred tax Exemption from recognition of deferred tax assets Manner of expected recovery Substantively enacted tax rates Tax rates based on manner of recovery Recovery of investment property Different tax rates for levels of taxable profit Reconcile movements in deferred tax balances Disclosure of deferred tax movements Accounting for a deferred tax movement Deferred tax movements in the income statement Deferred tax movements in other comprehensive income Deferred tax movements in equity Disallowance of discounting Deferred tax on capital losses Practical issues Investment tax credits Deferred tax on compound financial instruments Divestments: Rollover relief Intra-group transactions 141 Chapter 6: Deferred Tax Asset Recognition Ingeborg Lewis Introduction Deferred tax assets Relevant deferred tax assets and GAAPs Recognizing a deferred tax asset 145 xii

5 6.3. Deferred tax assets on unused tax losses and credits Background The threshold: Probable History of recent losses Convincing other evidence Specific tax regimes Tax rate to be used Discounting Netting 163 Chapter 7: Tax Exposures Koen De Grave and Scott Miller Introduction Basic theory and technical guidance Identification of uncertain tax positions Assessing probability (recognition) Evidence to support recognition Detection risk Tax opinions and external evidence Recognizing uncertainties related to valuation Measuring risk Measurement under US GAAP Measurement under IFRS Examples of US GAAP and IFRS recognition and measurement Example of transfer pricing uncertain tax position Binary tax position Subsequent events Effective settlement Interest and penalties Accounting policy election under US GAAP Accounting policy election under IFRS Financial statement disclosures Reporting under US GAAP Balance sheet classification Disclosures reported at gross vs. net 193 xiii

6 Annual disclosures under US GAAP Accounting policy on classification of interest and penalties Total amount of interest and penalties recognized in the income statement and balance sheet Reasonably possible significant changes expected within 12 months Tax years still subject to examination by a major tax jurisdiction Amount that would affect the effective tax rate The gross tabular reconciliation of unrecognized tax benefits Reporting under IFRS Conclusion 202 Chapter 8: Disclosure Notes Patrick van Gerven and Frank Imming Introduction Presentation versus disclosure Presentation and disclosure requirements IAS Introduction Presentation Offsetting current taxes Offsetting deferred taxes Tax expense 214 xiv

7 Exchange differences on deferred foreign tax liabilities or assets Disclosure Total tax expense (income) Effective tax rate reconciliation Tax rates Tax via equity and other comprehensive income Overview of tax losses/non-recognized deferred tax assets Investments in subsidiaries, branches and associates and interests in joint arrangements Deferred taxes Discontinued operations Income tax consequences of dividends Business combinations Future taxable income Tax contingencies and events after the reporting period Non-IAS 12 presentation and disclosure requirements Introduction IAS 1: Presentation of financial statements IAS 7: Statement of cash flows IAS 10: Events after the reporting period IFRS 3: Business Combinations IFRS 8: Operating Segments Conclusion 261 Chapter 9: Special Items Mark Koek and Tjeerd van den Berg Introduction Initial recognition General rule of initial recognition Mergers Assets carried at fair value Change in tax status of the entity Migration of an entity Subsequent changes in value: Impact on the initial recognition exemption Outside basis differences 274 xv

8 What is an outside basis difference? Calculating deferred taxes on outside basis differences Impact of local tax treatment of the shareholder Impact of tax treaties Deferred tax assets in relation to unremitted retained earnings Withholding taxes and deferred tax assets on unremitted retained earnings Impairment of investments and deferred tax assets on unremitted retained earnings Business combinations Basic principles Acquisition method Identify the acquirer Determine the acquisition date Recognize and measure assets and liabilities Recognizing and measuring goodwill or bargain purchase Examples of business combination Examples of purchase price allocation Example of deferred tax in a share deal Example of deferred tax in an asset deal Example: Asset deal and share deal in one transaction Example: Identifiable assets Fair value, no tax basis Example: net operating losses or tax credits in a business combination Specific disclosures for business combinations Share-based payments Different share-based payment transactions Objective and examples of share-based payment accounting (IFRS 2) Significant dates Equity-settled share-based payment transactions Cash-settled share-based payment transactions 309 xvi

9 Tax accounting consequences of share-based payment transactions Tax accounting paragraphs Tax accounting: Share-based payment transactions examples Cash-settled share-based payments: example Other comprehensive income and discontinued operations Other comprehensive income Components of other comprehensive income Changes in revaluation surplus Discontinued operations Definition and rationale Scope Measurement Presentation and disclosures Interim reporting Interim reporting and accounting for income taxes Determination of estimated weighted average tax rate One-time events or discrete items Convergence of US GAAP and IFRS; existing differences in accounting for income taxes Background of convergence Differences in basic model Differences in recognition and measurement Differences with regard to specific items Intra-group transactions Revaluations of property, plant and equipment Backward tracing Foreign exchange differences on remeasurement Unremitted retained earnings Share-based payments Uncertain tax positions Differences in presentation 348 xvii

10 Chapter 10: Banks and Other Financial Institutions Stephen Bruce and James Clark Introduction Specific tax accounting issues faced by banks Branch structures Financial instruments Background Asset accounting Liability accounting Example Share-based compensation Specific tax accounting impact of regulatory regimes for banks Historical reference Role of the regulators Overview of capital requirements under the Basel Accords The application of the Basel III Framework Treatment of deferred tax assets under the Basel Accords US adoption of Basel III European adoption of Basel III Summary Specific tax accounting impact of regulatory regimes for insurance companies Introduction Role of the regulators Treatment of deferred taxes under Solvency II Conclusion 384 Chapter 11: Case Study Heather Jurek 385 Background 385 Additional information 385 ABC Foreign Subsidiary (FS) 388 ABC Global, Inc. consolidated financials 413 xviii