On November 19, 2013 the Financial Accounting Foundation (FAF) completed its post-implementation review (PIR) of Financial Accounting Standards Board (FASB) Statement No. 109, Accounting for Income Taxes (FAS 109) (codified in Accounting Standards Codification Topic 740, Income Taxes). The FAF concluded that FAS 109 adequately achieved its intended purposes, although the complexity associated with accounting for income taxes has not been reduced. Additionally, the FAF concluded that FAS 109 provides investors with decision-useful information noting, however, that investors struggle to assess cash tax effects and find it difficult to understand the potential tax costs associated with foreign earnings considered to be indefinitely reinvested. The FAF further indicated that preparers have difficulty with ‘intraperiod tax allocation’, accounting for intercompany transfers of assets, and indefinitely reinvested foreign earnings.
Note: On December 3, 2013, the Financial Accounting Standards Board (FASB) released its response to the Financial Accounting Foundation's report on FAS 109, indicating that the FASB will follow-up on areas of concern noted in the report by seeking input from financial statement users, preparers, auditors, and others. The response specified that areas for follow-up include intraperiod tax allocation, intercompany transfers of assets, indefinitely reinvested foreign earnings, and income tax cash flows. The outreach will seek to identify cost-effective solutions to reduce complexity or provide additional decision-useful information, while also understanding stakeholders' views with respect to the priority of addressing those concerns relative to other FASB projects that may be undertaken..