Statutory financial reporting of UK subsidiaries of US MNCs will soon be affected by forthcoming changes to UK GAAP. These changes will not only impact UK accounting but will also have a knock-on effect on tax reporting and the timing of cash tax payments. As part of the change there are accounting choices to be made which could also impact cash taxes.
UK GAAP will be abolished in its current form and by 2015 at the latest, all UK companies currently using UK GAAP will have to change either to a form of GAAP which uses the IFRS methodology, or adopt a completely new UK GAAP standard (FRS 102).
Companies need to start considering the choices available to them now. By making smart decisions about which companies adopt which GAAP, and the timing of adoption, it is often possible to prevent any adverse tax consequences and/or to improve a company’s tax position.
As this will take time, the work should start soon, and must be considered in conjunction with the other effects of GAAP changes on companies’ financial statements, distributable reserves and accounting system.