Tax accounting impacts of the IFRS revenue recognition and leasing standards
Overview
The IFRS revenue recognition and leasing standards, IFRS 15 and IFRS 16, will have important tax accounting implications, particularly for companies operating internationally. The IFRS standards are different from the related US GAAP standards, ASC 606 and ASC 842, so although there is some overlap in the tax accounting that will result there are some important differences. This paper highlights some of the key consequences of the new standards for tax accountants, looking at both the direct results of the new standards and at some of the indirect result
The takeaway
In order to make the transition to the new standards as smooth as possible, tax teams should involve themselves throughout the implementation process. In putting together an action plan for tax, they should:
- Connect with their colleagues in finance or accounting teams to ensure the integration of tax into the process;
- Understand the impact on pre-tax revenue and costs, and on the balance sheet;
- Identify territories which will be impacted by the adoption of the new standard;
- Assess for each relevant territory the impact of the pre-tax changes on the tax position;
- Take account of other impacts, such as transfer pricing, interest restrictions, and information reporting (e.g., CbCR);
- Identify any changes to systems that might be required to ensure that the information required for tax return filings and tax reporting is available;
- Identify any changes to processes and controls that are required as a result of the new standards.
