It's time to hit the "reset" button and adopt targeted changes to simplify the income tax accounting standard, read our Point of view to find out more.
Significant changes in the business environment, including changes in tax laws and global expansion, have increased the complexity of accounting for income taxes.
The current income tax accounting standard, developed over two decades ago, includes many mechanical rules and “exceptions” which in today’s environment can make it difficult to apply and often yields information that is challenging to understand. Despite significant investment in training and the widespread use of outside service providers, accounting errors and internal control problems persist.
The Financial Accounting Foundation—the overseer of the FASB—recently completed a post-implementation review of the US income tax accounting guidance. The findings acknowledged the operational challenges. We commend the FASB for continuing to analyze the report and perform outreach to focus on aligning the income tax accounting model to meet stakeholders’ needs. We believe targeted improvements to certain areas can be implemented now to (1) reduce complexity for preparers, auditors and regulators and (2) enhance decision-usefulness to users.