FAF to Conduct Post-Implementation Review of FASB Standard on Accounting for
Income Taxes
Norwalk, CT, February 4, 2013—A 1992
accounting standard focusing on accounting for income taxes will be the subject
of the next post-implementation review (PIR) conducted by the Financial
Accounting Foundation (FAF). Financial Accounting Standards Board (FASB)
Statement No. 109, Accounting for Income Taxes (FAS 109) (codified in
Accounting Standards Codification Topic 740, Income Taxes), establishes
financial accounting and reporting standards for the effects of income taxes
that result from an organization´s activities during the current and preceding
years.
The objective of FAS 109 is to recognize the amount of a) taxes
payable or refundable for the current year, and b) deferred tax liabilities and
assets for the future tax consequences of events that have been recognized in an
organization´s financial statements or tax returns. FAS 109 applies to public
and private companies, and nonprofit organizations that file financial reports
in accordance with U.S. Generally Accepted Accounting Principles
(GAAP).
"FAS 109 was chosen for review because it meets several of our
post-implementation review criteria. When it was issued, it represented a
significant change in the accounting for income taxes and affected a wide range
of organizations," said FAF President and Chief Executive Officer Teresa S.
Polley. "Additionally, stakeholders frequently note that income tax accounting
is a complex topic and over the years the FASB´s advisory groups have mentioned
that it is an area that could be improved—both the accounting guidance and the
information disclosed to investors."
To date, the FAF PIR team has
completed reviews of two FASB standards: FASB Statement No. 131, Disclosures
about Segments of an Enterprise and Related Information (codified in
Accounting Standards Codification Topic 280, Segment Reporting) in January 2013;
and FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes (FIN 48) (codified in Accounting Standards Codification Topic 740,
Incomes Taxes), in January 2012. The final reports of those studies are
available on the FAF
website. The PIR of FASB Statement No. 141R, Business Combinations,
is currently under way.
The PIR process is intended to assist the FAF´s
Board of Trustees with its ongoing efforts to evaluate the effectiveness of the
standard-setting process for both the FASB and the Governmental Accounting
Standards Board (GASB). The PIR process is designed to be independent of the
standard-setting process of the FASB and the GASB. The FAF review staff reports
to the Trustees and the FAF president and chief executive officer, but review
team members are drawn from experienced FASB and GASB staff to promote a
collaborative review process aimed at improving the standard-setting process.
More information on the FAF´s PIR process can be found on the FAF
website. Stakeholders who would like to participate in PIR surveys
conducted by the Financial Accounting Foundation should register
online.