Around the world: When to account for tax law changes

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Tax accounting insights 01/21/2014 by Tax accounting services
Around the world: When to account for tax law changes

At a glance

Keeping track of tax law changes around the world has increasingly become a challenge for businesses. Companies are rapidly expanding their geographic footprint at a time when the evolution and developments in jurisdictional tax laws are undergoing nearly constant change.

Keeping track of tax law changes around the world has increasingly become a challenge for businesses. Companies are rapidly expanding their geographic footprint at a time when the evolution and developments in jurisdictional tax laws are undergoing nearly constant change. Naturally, changes in tax law have an impact on tax planning, tax return preparation and, ultimately, tax cash flows. Those consequences, however, are often preceded by the impact of such changes on company financial reporting.

Companies reporting under US Generally Accepted Accounting Principles (US GAAP) or International Financial Reporting Standards (IFRS) need to understand when a change in tax law impacts the measurement of current and deferred income taxes — that is, they must understand in which reporting period the effects of a change in the law are to be recorded. Reporting groups should have procedures in place to ensure that the relevant financial accounting standard is properly applied. Failure to properly apply the relevant standard may result in current and deferred income taxes being misstated and reveal a weakness in controls.

This second edition of our publication Around the world: When to account for tax law changes has been updated to include information on 48 additional jurisdictions, including three US states. It also reflects any changes in our understanding of the lawmaking processes of jurisdictions presented in the original edition.