E.14 Interim Reporting
Under U.S. GAAP, an entity must estimate its ordinary income and the related tax
expense or benefit for the full fiscal year (total of expected current and deferred
provisions) to calculate its estimated AETR. Ordinary income or loss is income from
continuing operations, excluding significant unusual or infrequently occurring
items. There are other limited exceptions in which the AETR is not used to compute
the income tax provision for the interim period. Amounts and related tax effects, if
any, excluded from the overall forecasted AETR are generally accounted for either
discretely or through a separate forecasted tax rate. See Chapter 7 for additional guidance.
Under IFRS Accounting Standards, a separate estimated average annual
effective income tax rate is determined for each taxing jurisdiction and
applied individually to the interim-period pretax income of each jurisdiction. The
interim-period tax charge is the sum of each entity’s interim tax charge. IAS 12
does not address interim tax reporting. Paragraphs B12 through B22 of IAS 34 provide
examples of the application of the recognition and measurement principles of IAS 34
to interim income tax expense.