Defining Issues   |   October 2016
 

FASB changes accounting for income taxes on intercompany transfers

KPMG reports on ASC 740 changes to interco transfers. New requirement to recognize income tax implications of intercompany asset transfers at transaction date.

Applicability

ASU 2016-16

  • Company that accounts for intercompany asset transfers
  • Does not apply to transfers of inventory

Relevant dates

Mandatory effective dates and early adoption provisions:

Effective date:

Public business entities

All other entities

Annual periods – Fiscal years beginning after

Dec. 15, 2017

Dec. 15, 2018

Interim periods – In fiscal years beginning after

Dec. 15, 2017

Dec. 15, 2019

Early adoption allowed?

Yes, at the beginning of an annual period for which no financial statements (interim or annual) have already been issued or made available for issuance.

 

Key impacts

  • Amendments to FASB ASC Topic 740
  • Immediate recognition of the tax consequences of intercompany asset transfers other than inventory will increase earnings volatility, particularly for companies that regularly transfer intangible assets to foreign subsidiaries
  • Companies that transfer assets between subsidiaries will need to disclose why the income tax rate is volatile
  • Companies may need to redesign their processes to measure and value the new deferred tax assets that frequently will arise from these transactions. Current US GAAP prohibits recognizing these deferred tax assets

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Report contents

  • Principle-Based Reserving
  • Credit for Reinsurance Model Regulation
  • Variable annuities
  • Investments
  • FASB Accounting Standards Update
  • Cybersecurity
  • Group capital calculation
  • Investment risk-based capital
  • Other accounting highlights
  • Other regulatory highlights
  • Other actuarial highlights

 

 

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