Income Taxes: IFRS vs. U.S. GAAP

Under both IFRS and U.S. GAAP, the guidance for accounting for income taxes is provided by one main pronouncement.
RSM McGladrey
August 2009
The primary standard under IFRS is International Accounting Standard (IAS) 12, Income Taxes, which is accompanied by two additional interpretations: SIC-21 Income Taxes — Recovery of Revalued Non-Depreciable Assets, and SIC-25, Income Taxes — Changes in the Tax Status of an Entity or its Shareholders. U.S. GAAP relies on FASB Statement No. 109, Accounting for Income Taxes, which is accompanied by a large amount of guidance and interpretations.
While U.S. GAAP has a larger depth of literature, both standards are based on the same approach. That common ground is the balance sheet liability approach, where an entity recognizes deferred tax assets and liabilities for temporary differences (differences between the carrying amount of an asset or liability on the balance sheet and its tax base) and for operating loss and tax credit carryforwards. However, while both have the same foundation, differences arise as both frameworks have various exceptions to the basic principle.
The IASB has been working to revise IAS 12 and released an exposure draft on March 31, 2009. This exposure draft is focused on convergence with U.S. GAAP, so the differences between the two standards are expected to lessen as IAS 12 evolves. However, based on the exposure draft, it is unlikely that IAS 12 and SFAS 109 will reach full convergence.
To see an analysis of several of the notable differences between IAS 12 and SFAS 109, read our most recent IFRS Bulletin, Income Taxes: IFRS vs. U.S. GAAP in RSM McGladrey’s IFRS Resource Center