The staff provided a brief update on the income tax convergence project. Both the FASB and the IASB have yet to discuss the allocation of tax items to shareholders' equity, issues relating to investments in subsidiaries, branches, associates and joint ventures, and disclosure issues. The staff noted that the FASB has yet to discuss certain issues already agreed by the IASB including scope exceptions that currently exist in SFAS 109 for inter-company transfers of inventory, accounting for foreign non-monetary asserts, and certain criteria for measuring deferred tax assets and deferred tax liabilities, such as the use of enacted rates versus substantially enacted rates. The staff noted that all these issues will have been discussed by both Boards by the end of October.

The Board agreed to amend the definition of tax base so that it reads as follows:

Tax base is a measurement attribute. It is the measurement under existing tax law applicable to a present asset, liability or equity instrument recognised for tax purposes as a result of one or more past events. That asset, liability or equity instrument may or may not be recognised for financial reporting purposes.

The Board agreed that examples of tax base should be included as application guidance to a revised IAS 12. The Board agreed that an entity should only recognise deferred tax assets and liabilities for basis differences that will result in taxable or deductible amounts where the reported amount of the asset or liability is recovered or settled. The Board agreed to eliminate the guidance in IAS 12 relating to the way in which management intent as to how the carrying amount of an asset or liability will be recovered can impact the tax base of that asset or liability.

The Board agreed that additional guidance should be provided to support the notion of a 'tax balance sheet' in order to clarify to constituents that this is a balance sheet that would be presented if tax law was used as the basis for accounting.