Academic journal article Journal of Accountancy

IASC Amends Standard on Income Taxes and Issues ED on Employee Benefits

Academic journal article Journal of Accountancy

IASC Amends Standard on Income Taxes and Issues ED on Employee Benefits

Article excerpt

The International Accounting Standards Committee revised International Accounting Standard (IAS) no. 12, Accounting for Taxes on Income. It also issued an exposure draft on accounting for retirement benefits that would replace IAS no. 19, Retirement Benefit Costs.

The revision of IAS no. 12 reduces the number of options companies have when accounting for deferred tax. "Most of the various options in the old standard have been eliminated," said Sir Bryan Carsberg, IASC secretary-general. "The result should be much clearer information for users of financial statements"

Previously, companies accounting for timing differences between taxable profit and accounting profit could choose either the deferral method or a liability method. The revised standard requires companies to use a liability method. "The revised standard is very similar to Financial Accounting Standard Board Statement no. 109, Accounting for Income Taxes," said Peter Clark, IASC senior research manager. "There are only a few exemptions in FASB Statement no. 109 that are not in IAS no. 12, such as exemptions for hyperinflation in foreign subsidiaries." He said the FASB attended IASC meetings and provided input to help harmonize the FASB and IASC standards. IAS no. 12 will be effective for periods beginning on or after January 1, 1998.

Updating pension regulations

The IASC exposure draft (E54) for retirement benefits is intended to clarify how retirement benefit costs should be treated on the balance sheet. …

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