Under U.S. GAAP, ASC 740-10-25-3(e) requires entities to use the consolidation guidance in ASC 810-10 to account for income taxes paid on intra-entity profits on inventory remaining within the group, and it prohibits the recognition of a DTA for the difference between the tax basis of the inventory in the buyer’s tax jurisdiction and its cost as reported in the consolidated financial statements (i.e., after elimination of intra-entity profit). Specifically, ASC 810-10-45-8 states that “[i]f income taxes have been paid on intra-entity profits on inventory remaining within the consolidated group, those taxes shall be deferred or the intra-entity profits to be eliminated in consolidation shall be appropriately reduced.”
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