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Journal entry — FASB redeliberates income tax proposals

Published on: Oct 07, 2015

At its meeting on October 5, 2015, the FASB redeliberated two proposed Accounting Standards Updates (ASUs) related to the accounting for income taxes: Intra-Entity Asset Transfers and Balance Sheet Classification of Deferred Taxes.

Intra-Entity Asset Transfers

The Board discussed the different views expressed by constituents in their comment letters on the proposed guidance to eliminate the current exception in ASC 7401 that requires entities to defer the income tax consequences of intra-entity asset transfers until the assets are sold to an outside party. A number of constituents asserted that both costs and complexity would increase under this proposal. Some respondents proposed that the Board permit a practical expedient to continue the exception for intra-entity transfers of inventory while eliminating the exception for transfers of all other assets. The Board instructed its staff to perform additional research on these issues as well as outreach regarding the costs and benefits of a practical expedient for intra-entity inventory transfers. The Board will redeliberate the proposal at a future meeting and is expected to either eliminate the exception entirely (in a manner consistent with the current proposal) or establish the practical expedient, in which case the exception would be eliminated for all intra-entity asset transfers other than inventory.

Balance Sheet Classification of Deferred Taxes

The FASB affirmed its proposal to classify all deferred taxes as noncurrent in a classified balance sheet and asked its staff to draft a final ASU. The ASU would be effective for public business entities beginning on or after December 15, 2016, including interim and annual periods. For entities other than public business entities, it would be effective for annual reporting periods beginning after December 15, 2017, and interim reporting periods within annual reporting periods beginning after December 15, 2018. The Board decided to allow early adoption for all entities.

In addition, the Board decided that entities would be permitted to apply the amendments prospectively or retrospectively. 


1  FASB Accounting Standards Codification Topic 740, Income Taxes.


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