FASB ratifies consensus on netting unrecognized tax benefits against loss or other tax carryforward assets

Tax Accounting Insights

The Financial Accounting Standards Board (FASB) today ratified the accounting guidance proposed by the Emerging Issues Task Force (EITF) consensus for Issue 13-C, Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. We expect the final Accounting Standards Update (ASU) to be issued within the next few weeks.

This new standard requires the netting of unrecognized tax benefits (UTBs) against a deferred tax asset for a loss or other carryforward that would apply in settlement of the uncertain tax positions. Under the new standard, UTBs will be netted against all available same-jurisdiction loss or other tax carryforwards that would be utilized, rather than only against carryforwards that are created by the UTBs. This departs from the original guidance provided by the FASB staff, and currently reflected in the PwC Guide to Accounting for Income Taxes.

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