Defining Issues | December 2019

Simplifications to accounting for income taxes

KPMG reports on ASU 2019-12, which removes certain exceptions for recognizing deferred taxes for investments, performing intraperiod allocation and calculating income taxes in interim periods. The ASU also adds guidance to reduce complexity in certain areas, including recognizing deferred taxes for tax goodwill and allocating taxes to members of a consolidated group.

Applicability

ASU 2019-12

  • All entities subject to income taxes

Relevant dates

Effective date Public entities All other entities

Annual periods – Fiscal years beginning after      

Dec. 15, 2020

Dec. 15, 2021

Interim periods – In fiscal years beginning after

Dec. 15, 2020

Dec. 15, 2022

Early adoption allowed in fiscal years beginning after

Yes, in periods for which financial statements have not been issued (or made available for issuance).

An entity that elects early adoption in an interim period should reflect any adjustments as of the beginning of the annual period that includes that interim period.

An entity must adopt all the amendments at the same time.

 

Key impacts

The ASU introduces the following new guidance:

  • A policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax.
  • How to evaluate whether a step-up in tax basis of goodwill relates to a business combination or a separate transaction.

The ASU changes the following current guidance:

  • Making an intraperiod allocation, if there is a loss in continuing operations and gains outside of continuing operations.
  • Determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting.
  • Accounting for tax law changes and year-to-date losses in interim periods.
  • Determining how to apply the income tax guidance to franchise taxes that are partially based on income.

Report contents

  • Applicabilty
  • Key facts and impacts
  • Effective dates and transition

Related content

KPMG's Handbook: Accounting for income taxes
 

Spotlight on contributors

Thomas Hoffman

Thomas Hoffman

Senior Manager, Audit, KPMG US

Angie Storm

Angie Storm

Partner, Dept. of Professional Practice, KPMG US

Karmen Ward

Karmen Ward

Managing Director, Audit, KPMG US

 

 

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