IASB and FASB differ on tax effects of share-based payment
31 Jul 2003
In separate meetings last week, the IASB and the FASB reached different conclusions on accounting for the income tax effects of share-based compensation transactions with employees.
The IASB reaffirmed the proposal in ED 2 that all tax effects of such transactions should be recognised in profit or loss. The FASB, on the other hand, concluded that if a deduction reported on a tax return for share-based compensation exceeds the cumulative compensation expense recognised for accounting purposes, the tax benefit of the excess is a direct credit to equity, which is the existing requirement of SFAS 123, Accounting for Stock-Based Compensation.