IT2013_1069_AppA_v1_P2_6-19

Appendix A

Summary of Noteworthy Revisions


The 2013 edition of PwC’s Guide to Accounting for Income Taxes (the Guide) has been updated to reflect new and updated authoritative and interpretive guidance since the June 30, 2012 edition. This appendix includes a summary of noteworthy revisions to the Guide.

Noteworthy Revisions

Chapter 2: Objectives and Basic Principles

Section 2.3.4.2.2 was updated to address the accounting for intra-entity transfers reported at predecessor basis in the context of a spin-off.

Chapter 3: Temporary Differences

Section 3.2.5 was updated to address the FASB’s EITF project on low-income housing credits, as well as the recent exposure draft to revise the criteria to qualify for the “effective yield” method to account for low-income housing credit investments.

Chapter 5: Valuation Allowance

Section 5.1.1 was updated to add Example 5-1, which considers the impact of an anticipated merger as part of a Company’s valuation allowance assessment.

Section 5.3.3 was updated to reflect the 2013 revision to the required consultation policy when there are going concern considerations. The revised policy addresses the consultation requirement when the engagement team performs extended going concern procedures.

Section 5.4.2 was updated to add Example 5-7, which illustrates consideration of limitations on the use of net operating loss carryforwards in assessing the need for a valuation allowance.

In Section 5.4.3.2.1.1, a PwC Observation Box was added which indicates that the sale of appreciated securities classified as available-for-sale or trading should only be considered an available tax-planning strategy to the extent that a company is prepared to sell those securities and trigger the realized gains.

Section 5.4.3.2.1.2 was updated to address the FASB’s recent exposure draft which proposes that deferred tax assets on debt instruments measured at fair value with changes in fair value recognized in other comprehensive income be evaluated separately from other deferred tax assets of an entity.

Chapter 8: Change in the Tax Status of an Entity

Section 8.1 was updated to add Example 8-1, which illustrates the accounting for deferred taxes on an available for sale security when a change in tax status occurs.

Chapter 10: Business Combinations

Section 10.11.8 was updated to add Question 8, which addresses changes to amounts recorded in acquisition accounting subsequent to the completion of the measurement period.

Chapter 11: Outside Basis Differences and Other Special Areas

Section 11.1.4.5.1 was updated to add Example 11-3, which illustrates the recording of an outside basis deferred tax liability when an investment in a domestic subsidiary is impaired for tax purposes.

Section 11.1.5.9 was updated to reflect the 2013 revision to the required consultation policy when there are going concern considerations. The revised policy addresses the consultation requirement when the engagement team performed extended going concern procedures.

Section 11.1.7 was updated to add Example 11-6, which illustrates the measurement of a deferred tax liability related to excess book-over-tax outside basis in an equity method investment.

Section 11.1.8.1 was updated to add Example 11-7, which illustrates when to recognize a tax benefit for a worthless stock deduction.

Section 11.1.10.1 was revised to indicate that the income tax accounting guidance for subsidiaries, as defined by the ASC Master Glossary, applies to consolidated variable interest entities.

Section 11.6.1 was updated to add Example 11-14, which illustrates the recording of foreign currency fluctuation impact on deferred income taxes related to foreign branches.

Chapter 12: Intraperiod Tax Allocation

Section 12.2.3.3.3.1 was updated to add Example 12-23, which illustrates the consideration as to whether to include deferred taxes in the carrying amount of a disposal group classified as held-for-sale.

Chapter 14: Separate Financial Statements of a Subsidiary

In Section 14.3, a PwC Observation Box was added which indicates that an SEC registrant currently following the separate return method would be unable to justify the preferability of another method (e.g., the benefits-for-loss method) and therefore would not be able to make a change in accounting principle.

Section 14.8 was updated to add Example 14-7, which illustrates the consideration of foreign taxes paid in the separate company financial statements of subsidiary.

Chapter 15: Financial Statement Presentation & Disclosure

Section 15.5.1.5.1 was updated to add Example 3 and 4, which illustrate that uncertain tax positions included in the tabular reconciliation that do not initially result in a liability for unrecognized tax benefits.

Chapter 16: Accounting for Uncertainty in Income Taxes

Section 16.2.1.4 was updated to add Example 16-1, which illustrates the consideration of detection risk when evaluating uncertainty in non-income based taxes.

In Section 16.7.2.2, a PwC Observation Box was added to address the FASB’s recent exposure draft which would potentially require an unrecognized tax benefit be presented in the statement of financial position as a reduction to a deferred tax asset for a net operating loss carryforward or a tax credit carryforward.

Chapter 17: Accounting for Income Taxes in Interim Periods

Section 17.1.1.2.1 was updated to clarify that items reported separately in the financial statement must meet the infrequent and unusual criteria in order to be excluded from the estimated annual effective tax rate calculation.

Section 17.2.2.1 was updated to add Example 17-4, which illustrates the treatment of withholding taxes in an interim period tax calculation for an entity with operations in multiple jurisdictions.

Section 17.2.2.1 was updated to add Example 17-9, which clarifies the guidance on the recognition of prior year windfall benefits during interim periods.

Section 17.5.1 was updated to add Example 17-11, which illustrates interim tax accounting for acquisition related transaction costs.