Short-term Convergence — Income Taxes

Date recorded:

Enacted and substantively enacted

At the January meeting, the Board deliberated the use of 'enacted' or 'substantively enacted' tax rates. The Board discussed whether the notion of substantially enacted should be based on probability of enactment or on the process of enactment and the Board decided that reaching a specified stage in the process should be required. In terms of the stage, the process of enactment would be complete when the remaining steps 'will not change the outcome'.

The purpose of this session was for the Staff to provide additional information to the Board on the implementation and operation of substantively enacted tax rates. The processes in a number of jurisdictions were considered and the Board discussed the Staff proposals of when substantive enactment was considered to have occurred. Some Board members noted that the US GAAP guidance refers to 'enactment' therefore setting the point later (e.g. when the President signs the legislation) compared to 'substantively enacted' which could be prior to that point depending on the legislative process.

The Board was supportive of the 'substantive enactment' principle on the basis that it would be achieved when the steps remaining in the process 'will not change the outcome'.

The Board agreed to proceed with this issue by providing the analysis of each jurisdiction in the Basis for Conclusions, and request specific comments from constituents. National Standard Setters would be allowed to review this information prior to the exposure draft being issued.

Uncertain tax positions

The purpose of this session was for the FASB staff to update the IASB members about the FASB's current deliberations on the initial recognition, initial and subsequent measurement, derecognition, classification and disclosures of uncertain tax positions. In addition, the feedback covered interim reporting, interest and penalties, comment period, transition method and the effective date. No decisions were taken by the IASB.

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