Corporation Tax

US GAAP ― deferred tax

Produced by Tolley in association with Malcolm Greenbaum
  • 14 Oct 2021 16:59

The following Corporation Tax guidance note Produced by Tolley in association with Malcolm Greenbaum provides comprehensive and up to date tax information covering:

  • US GAAP ― deferred tax
  • Terminology differences
  • Current tax
  • Deferred tax

US GAAP ― deferred tax

This guidance note relates to the aspects of ASC 740 which were previously known as FAS 109.

The concepts underlying FAS 109 are similar to those under IFRS and therefore this note gives an overview of the main differences between the two standards along with practical examples. The differences discussed below are based on those identified jointly by the IASB and FASB as being the most significant when the two boards were considering converging the accounting for income taxes under IFRS and US GAAP.

There are some specific accounting rules in FAS 109 which apply to specific types of US companies such as Steamship Enterprises. These are outside the scope of this note as they are unlikely to be of application to UK readers.

In respect of accounting for uncertain tax positions and tax exposures, please see the US GAAP ― uncertain tax positions guidance note.

Terminology differences

It is worth noting that certain phrases under US GAAP have a different meaning to those under IFRS. These include:

US GAAP terminologyHow these would be described under IFRS / UK GAAP
Current year provisionCurrent year tax charge (sum of both current and deferred)
Tax reserveProvision (in the context of a provision for a tax exposure)
Valuation allowanceAmount of unrecognised asset, usually in the context of deferred tax assets. For example, if an entity had losses giving rise to a deferred tax asset of 100, but only 40 were recognised then this would mean that there was a valuation allowance of 60

Current tax

Current tax is broadly the same under IFRS and US GAAP. Specific differences relate to:

Accounting for uncertain tax positionsSee the US GAAP ― uncertain tax positions guidance note
Elimination of the effect of intra-group

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