The IASB staff began the meeting by providing a summary of the general comments received from constituents on the IASB's Income Tax exposure draft (ED). The ED was published on 31 March 2009, with comments due on 31 July 2009. The IASB received 168 comment letters.
The IASB staff pointed out that most respondents supported the two objectives of the project, which were convergence with US GAAP and improvements to the current accounting in IAS 12. However, the IASB staff explained that while most respondents were supportive of the overall objectives, many respondents felt that the ED failed to achieve these objectives due primarily to the following two reasons:
- The FASB suspended the project and has no specific plan to resume it.
- The proposed changes in the ED were viewed not as improvements but rather as the introduction of complex new rules.
The IASB staff then noted that as a result, there was very limited support amongst respondents for finalising the ED in its current form. Rather, many respondents suggested making certain improvements to IAS 12 in the short-term while also adding a new longer-term joint project with the FASB and/or a fundamental review of accounting for income taxes.
The Boards then discussed the direction of the income tax project. Some Board members expressed concern that not moving forward with the income tax project could be perceived by some that the FASB and IASB aren't committed to the convergence effort, as this was a project outlined in the Memorandum of Understanding. They further noted that not reaching convergence on income tax accounting could become a stumbling block to the US adoption of IFRS. Most Board members agreed that while a fundamental review and overhaul of accounting for income taxes is needed, the resources and time required for such an undertaking are not currently available. As such, the Boards agreed to delay such a fundamental review until some of the other existing projects are completed and discussed the possibility of the IASB making a few amendments to IAS 12 in the short-term.
The potential short-term amendments to IAS 12 that were discussed focused on convergence with US GAAP, specifically regarding the current recognition exceptions contained in IAS 12. Board members expressed differing views on how practical it would be to make these short-term amendments. The IASB staff pointed out that a majority of respondents to the ED were not in favour of making changes to the recognition exceptions currently contained in IAS 12 and noted that the FASB and IASB would need to work together and both amend their respective standards to reach full convergence in this area.
The IASB staff closed the discussion by mentioning that the direction of the IASB's income tax project will be discussed further at the IASB meetings over the coming month.