Corporation Tax

US GAAP ― uncertain tax positions

Produced by Tolley in association with Malcolm Greenbaum
  • 14 Oct 2021 19:57

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 ― uncertain tax positions
  • Asset rather than liability approach
  • Unit of account
  • The more likely than not recognition threshold (Step 1)
  • Amount of benefit to recognise (Step 2)
  • Example of numerical calculation
  • Issues subject to litigation
  • Reassessment of the provision
  • Interest and penalties
  • Disclosures
  • More...

US GAAP ― uncertain tax positions

This guidance note covers the aspects of ASC 740 which deals with accounting for uncertain tax positions. Previously this guidance was contained within the interpretation FIN 48.

Currently, the guidance under US GAAP is significantly more involved than under IFRS and also the level of disclosure of uncertain tax positions is far greater under US GAAP. See the IFRS Introduction guidance note for further guidance on uncertain tax positions under IFRS.

Asset rather than liability approach

When looking at uncertain tax positions, US GAAP looks at these from the perspective of tax benefits not recognised rather than liabilities provided for.

For example, suppose a filing position is taken on a tax return such that a deduction is claimed which reduces the tax payable by £100. On balance, it seems more likely that were the item examined then HMRC would prevail. The accounting analysis would be:

  1. IFRS / UK GAAP ― a provision is made for £100

  2. US GAAP ― there is a potential benefit of £100 which has not been recognised

In both cases, the outcome is the same in that the net assets of the company are £100 lower than they would have been in the scenario that the deduction was certain.

This guidance note is written from the US GAAP perspective of unrecognised tax benefits.

Unit of account

The other concept that applies under US GAAP but not IFRS or US GAAP is the unit of account. A unit of account will vary depending on the circumstances, and a company would take into account:

  1. the manner in which it prepares and supports its tax return

  2. the approach that the company expects the tax authority to take during an enquiry or tax audit

Access this article and thousands of others like it
free for 7 days with a trial of TolleyGuidance.

Think Tax.
Think Tolley.

Critical, comprehensive and up-to-date tax information

LEARN MORE LEARN MORE

Popular Articles

Self assessment ― amendments and corrections

Once a self assessment tax return has been filed, both HMRC and the taxpayer (or the agent) has the right to make changes to the return. There are different time limits depending on whether it is a correction by HMRC or an amendment made by the taxpayer.CorrectionHMRC has the right to amend the tax

19 Oct 2021 22:37 | Produced by Tolley Read more Read more

Exemption ― supplies of stamps and philatelic items

IP COMPLETION DAY: 11pm (GMT) on 31 December 2020 marked the end of the Brexit transition / implementation period entered into following the UK’s withdrawal from the EU. At this point in time, key transitional arrangements came to an end and significant changes began to take effect across the UK’s

28 Oct 2021 11:21 | Produced by Tolley Read more Read more

Share for share exchange

This guidance note considers the capital gains tax implications where shares are sold in exchange for new shares.The consideration paid by a purchasing company to the shareholder(s) for their shares in a target company could be in the form of either:•new shares in the purchasing company in exchange

10 Jan 2022 15:02 | Produced by Tolley Read more Read more