Focusing on tax accounting issues affecting businesses today
April – June 2015
Andrew Wiggins +44-(0)-121-232-2065 andrew.wiggins@uk.pwc.com |
The Global tax accounting services newsletter is a quarterly publication from PwC’s Global Tax Accounting Services (TAS) Group. In the newsletter we highlight issues that may be of interest to tax executives, finance directors, and financial controllers.
In this issue, we provide an update on the activity of the Financial Accounting Standards Board (FASB), the uncertain tax position project of the International Financial Reporting Standards (IFRS) Interpretation Committee, and the status of the exposure draft on recognition of deferred tax assets for unrealised losses released by the International Accounting Standards Board (IASB) in 2014. We also update you on the status of the new revenue standard and developments with country-by-country reporting.
In addition, we draw your attention to some significant tax law and tax rate changes that occurred around the globe during the quarter ended June 2015.
Finally, in the tax accounting refresher section we highlight certain aspects of accounting for income taxes associated with foreign branch operations—traditionally a complicated area of tax accounting.
This newsletter, tax accounting guides, and other tax accounting publications are also available online and on our new TAS to Go app, which you can download anywhere in the world via App Stores. To register for our quarterly TAS webcasts and access replays, please click here.
If you would like to discuss any of the items in this newsletter, tax accounting issues affecting businesses today, or general tax accounting matters, please contact your local PwC team or the relevant Tax Accounting Services network member listed at the end of this document.
You should not rely on the information contained within this newsletter without seeking professional advice. For a thorough summary of developments, please consult with your local PwC team.
Accounting and reporting updates
Recent and upcoming major tax law changes
Tax accounting refresher
Contacts and primary authors
On 8 June 2015, the FASB issued an exposure draft on tax accounting for stock compensation (see the Q1 of 2015 newsletter for the background) that includes the following revisions to the current guidance:
The proposed amendments to the accounting for excess tax benefits and tax deficiencies would be applied prospectively, while the proposed amendments related to the classification on the statement of cash flows would be applied retrospectively for all prior periods presented.
The exposure draft did not specify an effective date. The FASB decided to wait until comments are received on the proposal before determining a timeline.
The comment period for the exposure draft will end on 14 August 2015. Stakeholders are encouraged to provide comments on the above proposals.
The steps recently taken by the FASB and the ongoing efforts of the FASB staff are intended to reduce the complexity of accounting for income taxes. Organisations should be proactively evaluating the implications of the changes being proposed in these tax accounting areas.
Consideration should be given to responding to the exposure draft by the end of the comment period.
There are also likely to be further developments as the FASB works through the tax accounting topics on its agenda.
As we previously reported in the Q3 2014 newsletter, in August 2014, the IASB published for comment the Exposure Draft on Recognition of DTAs for Unrealised Losses (Proposed amendments to International Accounting Standard 12 Income Taxes (IAS 12)). The comment period on the Exposure Draft ended on 18 December 2014.
At its meeting in March 2015, the IFRS IC was presented with a summary and an analysis of the 68 comment letters received on the Exposure Draft, and decided to propose that the IASB should proceed with the proposed amendments, subject to some changes to the proposed wording.
The staff will present the IFRS IC's recommendations at a future IASB meeting.
As mentioned in the Q4 of 2014 newsletter, the IFRS IC decided to proceed with developing guidance in the form of an interpretation for the measurement of uncertain tax positions (UTPs).
It was expected that the IFRS IC would issue the draft interpretation for comment at the time when this newsletter was going to production.
We will update you on the developments in relation to this project in our next newsletter.
The ongoing efforts of the IFRS IC and its staff may lead to significant near-term improvements.
Organisations should continue to monitor further developments as the IFRS IC works through these projects.
In April 2015, the FASB and IASB decided to propose a one-year delay in the effective date of the new revenue accounting standard to 1 January 2018.
Early application of the standard continues to be permitted under IFRS. Companies reporting under US Generally Accepted Accounting Principles (US GAAP) would also be allowed to early adopt the guidance as of the original effective date, i.e., 1 January 2017, if the deferral proposal is approved.
The FASB and IASB discussed several implementation issues related to the new revenue standard at joint board meetings in February and March 2015. The boards were aligned on the need to address stakeholder feedback on licenses, performance obligations, and certain practical expedients upon transition, but did not agree on the approach.
The IASB is expected to recommend more limited clarifications while the FASB changes will be more extensive. The FASB has also decided to propose changes in other areas, for example, guidance on collectability and non-cash consideration, and new, optional 'practical expedients,' such as allowing companies to account for shipping as a cost, rather than a revenue earning deliverable, and to exclude all sales taxes from revenue, rather than evaluating each tax on a jurisdiction-by-jurisdiction basis.
The joint discussions are expected to continue in the coming months.
The IASB plans to put forth a single package of proposed amendments later this year, which should be open for comment for a period of at least 30 days. In contrast, the clarifications proposed by the FASB will be released for public comment as multiple exposure drafts.
Although companies will likely have an extra year to prepare, the implementation effort should not be underestimated. The earlier implementation issues are identified, the more likely companies can identify potential ways to address them. In our experience, many issues don't become evident until companies begin applying the new guidance to their specific transactions. The implementation challenges also extend well beyond accounting and income taxes, as the new guidance will impact processes, systems, and internal controls.
On 8 June 2015, the Organisation for Economic Cooperation and Development (OECD) released a package of measures for the implementation of a new CbC reporting plan developed under the OECD/G20 Base Erosion and Profit Shifting (BEPS) project.
The new implementation package consists of model legislation requiring the ultimate parent entity of a multinational group to file the CbC report in its jurisdiction of residence, including backup filing requirements when that jurisdiction does not require filing.
The package also contains three Model Competent Authority Agreements to facilitate the administrative exchange of CbC reports among tax authorities from different jurisdictions. The model agreements are based on the Multilateral Convention on Administrative Assistance in Tax Matters, bilateral tax conventions and Tax Information Exchange Agreements (TIEAs).
The model legislation in the new implementation package provides that the multinational (MNE) group from which the CbC report would be required is "a collection of enterprises related through ownership or control such that it is either required to prepare consolidated financial statements for financial reporting purposes under applicable accounting principles or would be so required if equity interests in any of the enterprises were traded on a public securities exchange." Thus, the model legislation makes it clear that purely private MNEs would be required to file a CbC report.
The model legislation also confirms that small MNE groups should be exempt from CbC reporting requirements if the group has less than 750 million Euro (or the equivalent of 750 million Euro in another currency as of January 2015) in consolidated revenue during the fiscal year immediately preceding the fiscal year for which reporting would be required.
Under the model legislation each jurisdiction would require a CbC report from the 'Ultimate Parent' of an MNE group if that ultimate parent is tax resident in that jurisdiction. In addition, each jurisdiction would require a CbC report from any 'Constituent Entity' of an MNE group that is tax resident in that jurisdiction if (1) the ultimate parent of the group is not obligated to file a CbC report in its jurisdiction of tax residence; (2) the ultimate parent's jurisdiction of tax residence has an exchange of information relationship (through treaty, tax information exchange agreement, or the Multilateral Convention on Administrative Assistance in Tax Matters) with the constituent entity's jurisdiction of tax residence but does not have a competent authority agreement in place to effect CbC information exchange with that jurisdiction; or (3) there has been a 'systemic failure' by the ultimate parent's jurisdiction to carry out CbC information exchange. In these circumstances, the model legislation also provides that if there is more than one constituent entity that is tax resident in a particular jurisdiction, the MNE group can designate one of those entities to file the CbC report with that jurisdiction.
The model legislation makes it clear that the OECD members believe that the CbC report can be collected 'locally' if the jurisdiction in which the ultimate parent is headquartered is not engaged in collecting and exchanging the reports. The introduction to the implementation package states that the model legislation "takes into account neither the constitutional law and legal system, nor the structure and wording of the tax legislation of any particular jurisdiction." Furthermore, "[j]urisdictions will be able to adapt this model legislation to their own legal systems, where changes to current legislation are required." It will be interesting to see if jurisdictions in which constituent entities are tax resident will find the collection of global information of the entire MNE to be within their constitutional and legal framework.
The model legislation also contains a provision that would allow MNEs to avoid the filing of CbC reports locally in situations in which reporting and exchange is not carried out in the ultimate parent's jurisdiction. In these cases MNEs could instead designate another group entity as a 'surrogate parent' to file CbC reports.
The model legislation provides for an apparently administratively burdensome system of 'notifications.' Under this system, each constituent entity of the MNE will notify its jurisdiction of tax residence whether it will act as the ultimate parent entity or surrogate parent entity. If not, it will need to notify the jurisdiction which entity in the group will act as the ultimate parent or surrogate parent or, where the CbC report will be filed locally. If there is more than one constituent entity in the local jurisdiction, it will need to be determined and reported which entity will be designated as the filing entity. These notices are to be delivered to the tax administrations in each jurisdiction in which the MNE has constituent entities by the end of each fiscal year for which the CbC report would be made. Receiving and processing these notices will also place a further administrative burden on tax administrations, but presumably they are considered necessary for the tax administrations to know where the CbC report for each MNE group will be filed each year and from which country they will be exchanged.
The implementation package makes it clear that the OECD members have reached at least initial consensus on the use and confidentiality of the CbC reports.
The model legislation provides that the tax administration collecting the CbC report "shall use the CbC report for purposes of assessing high-level transfer pricing risks and other base erosion and profit shifting related risks in [Country], including assessing risk of non-compliance by members of the MNE group with applicable transfer pricing rules, and where appropriate for economic and statistical analysis." The legislation further provides that "[t]ransfer pricing adjustments by the [Country Tax Administration] will not be based on the CbC report."
The model legislation also provides that "[t]he [Country Tax Administration] shall preserve the confidentiality of the information contained in the CbC report at least to the same extent that would apply if such information were provided to it under the provisions of the Multilateral Convention on Mutual Administrative Assistance in Tax Matters." Whether and how countries can actually implement and police these use and confidentiality restrictions remains to be seen.
Importantly, the model competent authority agreements reflect these same restrictions on use and confidentiality, as the special risk assessment-only use restriction in the model legislation would not otherwise apply to a jurisdiction receiving a CbC report through a treaty-based exchange. The competent authority agreements, however, further provide that "Jurisdictions are not prevented from using the CbC report data as a basis for making further enquiries into the MNE group's transfer pricing arrangements or into other tax matters in the course of a tax audit and, as a result, may make appropriate adjustments to the taxable income of a Constituent Entity." Presumably, this caveat was not considered necessary in the model legislation because it can be assumed that a jurisdiction actually collecting the CbC reports directly will consider itself free to use the information in this way. Of course, this caveat reflecting the intended use of the CbC reports to make "further enquiries into the MNE group's transfer pricing arrangements or into other tax matters in the course of a tax audit" presents one of the main concerns that MNE groups will have once the CbC reports are filed and exchanged.
Annexed to the model competent authority agreements is a Confidentiality and Data Safeguards Questionnaire which presents a series of questions to be answered by tax administrations in working out competent authority agreements to automatically exchange information electronically. This type of questionnaire was initially developed in connection with efforts to implement US Foreign Account Tax Compliance Act (FATCA) requirements and the so-called Common Reporting Standard. Presumably, the questionnaire was included in the CbC reporting implementation package to convey to both governments and private sector stakeholders that governments seeking to participate in CbC report exchange intend to take seriously their obligations to keep the reports confidential.
The model legislation contains a note that the legislation "does not include provisions regarding penalties to be imposed in the event a Reporting Entity fails to comply with the reporting requirements for the CbC report." The note further states that "[i]t is assumed that jurisdictions would wish to extend their existing transfer pricing documentation penalty regime to the requirements to file the CbC report." Thus, the application of penalties for failure to file CbC reports will be determined by each jurisdiction, and consequently, the penalties for failure to report could vary widely.
Consistent with the OECD guidance issued on 6 February 2015, the model legislation provides that the CbC report should be filed "no later than 12 months after the last day of the Reporting Fiscal Year of the MNE group." Also, the model legislation provides that the effective date of legislation would be for reporting fiscal years of MNE groups beginning on or after 1 January 2016. The 1 January 2016 effective date, however, is presented in brackets, presumably to acknowledge that some countries will deviate from that date.
For many OECD countries there may be a need to implement CbC reporting through changes to domestic law before it can fully come into effect. However, it is clear that there is a strong commitment from countries to implement CbC reporting effective 1 January 2016, as recommended by the OECD.
Given the lead time generally required to prepare internal systems and processes for CbC reporting and the level of funding and change that may be required, it is critical that taxpayers begin to assess now whether their current information and accounting systems will allow them to comply with the above CbC reporting requirements, as well as any subsequent information requests from tax authorities.
During the second quarter of 2015, the third and final element of the Investment Manager Regime became law. Broadly, the new rules exempt foreign funds (including eligible US onshore and offshore funds) from Australian tax on Australian-source gains. The rules apply to assessments for the 2015-2016 tax year and subsequent years. Entities have the option to apply the amendments to earlier tax years beginning 1 July 2011, through 30 June 2015.
During the second quarter of 2015, the Australian Treasurer delivered the Federal Budget, that included the following key proposals:
In addition, the Australian government released the exposure draft legislation detailing amendments to the consolidation regime previously announced in the 2013–2014 and 2014–2015 Federal Budgets. The proposed new rules are aimed at restoring integrity to the consolidation regime. Most significantly, the rules would remove perceived ‘double benefits' or ‘double detriments' when an Australian target or subsidiary joins a tax consolidated group. The exposure draft was open for comments until 19 May 2015.
During the second quarter of 2015, the Canadian Federal Minister of Finance presented the 2015 budget that included the following key proposals:
During the second quarter of 2015, a general anti-avoidance rule was enacted in Denmark. The rule will apply to any foreign transactions with a Danish entity. In essence, the protection normally available to transactions under Danish tax treaties and EU Directives will no longer be available unless multinational companies meet certain substance and commercial reasons tests. Notably, certain EU countries may be viewed as tax havens for Danish purposes.
During the second quarter of 2015, the European Commission presented Tax Transparency Package 2.0 to fundamentally reform corporate taxation in the EU, which sets out a series of initiatives to tackle tax avoidance, secure sustainable revenues and strengthen the Single Market for business. Key aspects of the plan include a proposal for a Common Consolidated Corporate Tax Base, a framework to ensure effective taxation where profits are generated and increased tax transparency.
During the second quarter of 2015, the French Ministry of Finance released new measures aimed at increasing transparency and promoting trust between the French tax authorities (FTA) and taxpayers. This action is a part of the French government's focus on tax evasion and tax fraud on a national and international scale. The following four new measures have been announced:
During the second quarter of 2015, previously announced 2015 Budget proposals were enacted in India. These included the following:
During the second quarter of 2015, the Italian government released draft legislation which covers a large number of international tax issues including the following:
The draft decree is currently under review in the Italian Parliament, and is therefore still potentially subject to modification.
During the quarter, the Italian tax authorities also issued guidelines addressing the anti-avoidance rules that apply to the notional interest deduction (NID) regime. NID is a notional deduction with respect to ‘new equity,' which includes retained earnings and certain cash capital contributions over a particular equity basis as of 2010.
During the second quarter of 2015, the Malaysian Ministry of International Trade and Industry issued guidelines on incentives for multinational corporations seeking to establish or expand their presence in Asian countries through a Malaysian Principal Hub. The incentives are structured in three tiers based on various criteria including minimum annual sales, employment, annual business spending and other qualifying activities. Through the Principal Hub incentive, Malaysia hopes to position itself as playing a key role in the integrated global supply chain of multinationals.
During the second quarter of 2015, the NZ Finance Minister delivered the 2015 Budget that included a proposal for a new ‘bright line' test to ensure that taxpayers selling NZ residential property (with some exceptions) within two years of purchase will pay tax on the profits. Additional administrative requirements would also be introduced for non-resident investors buying and selling NZ residential property, including requirements to have a NZ bank account and Inland Revenue Department (IRD) number and disclosure of their tax identification number from the home country.
In addition, the IRD released an Officials' Issues Paper proposing several changes to the non-resident withholding tax (NRWT) rules in relation to interest earned by non-residents from related party debt. The Issues Paper is part of the IRD's work on BEPS and is a feature of the government's tax policy work program announced by the Minister of Revenue earlier this year. Broadly the proposals include the following:
During the second quarter of 2015, the Swiss Federal Council released the updated draft bill of the Swiss Corporate Tax Reform III (CTR III) for further parliamentary discussion. The key elements of CTR III include the following:
During the second quarter of 2015, the IRS and US Treasury issued final regulations under Section 7874 (TD 9720) for determining when an expanded affiliated group will be considered to have substantial business activities in a foreign country. Broadly, the final regulations retain the 25% bright-line rule provided in the 2012 temporary regulations. They apply to acquisitions completed on or after 3 June 2015, and are effective as of 4 June 2015.
Foreign branch operations generally represent operations of an entity conducted in a country that is different from the country in which the entity is incorporated. For US entities, a branch can also take the form of a wholly owned foreign corporation that has elected for tax purposes to be treated as a disregarded entity of its immediate parent corporation.
Taxation of foreign branches may vary between various jurisdictions, which in turn may impact accounting for income taxes associated with such operations. While specifics of tax accounting for branches may need to be worked out for each jurisdiction, in our discussion below we will focus on the key aspects of the income tax standards IAS 12 (IFRS) and ASC 740 (US GAAP) relating to branch operations.
Branch operations are often subject to tax in two jurisdictions: the foreign country in which the branch operates and the entity's home country. Accordingly, the entity should typically have two sets of temporary differences relating to the branch's underlying assets and liabilities (generally referred to as 'inside basis' differences) that give rise to deferred tax assets and liabilities. Such differences arise in (1) the foreign jurisdiction in which the branch operates and (2) the entity's home jurisdiction.
Under both IFRS and US GAAP, the temporary differences in the foreign jurisdiction will be based on the differences between the book basis and the related foreign country tax basis of each asset and liability. The temporary differences in the home country jurisdiction will be based on differences between the book basis and the home country tax basis in each asset and liability.
Some countries, like the UK, provide a tax exemption in the entity's home country for certain branch profits. Consequently, no credit is available in the home country for foreign taxes paid by the branch. To the extent that the branch tax exemption applies, only temporary differences arising in the foreign jurisdiction would need to be considered.
Under IFRS, a temporary difference might also arise between the total carrying amount of the reporting entity's net assets in the branch and the tax base of the reporting entity's investment in the branch. This temporary difference is sometimes referred to as 'outside basis' difference.
Situations where outside basis differences in relation to branches could arise are quite rare. Nevertheless, the IAS 12 specifically addresses them as it was written broadly and with flexibility in mind. Outside basis differences may arise, for example, due to undistributed profits (e.g., if branch profits are taxed on distribution) or changes in foreign exchange rates.
Where the book value of the entity's net assets in the branch is greater than their tax base (e.g., due to retained profits) an entity needs to recognise a deferred tax liability (DTL), except to the extent that both of the following conditions are satisfied:
As an entity controls the ultimate distribution of the profits of a branch, it is able to control the timing of the reversal of temporary differences associated with that investment. Therefore, if the entity has determined that those profits will not be distributed in the foreseeable future it does not recognise a DTL.
Where the tax base of the entity's net assets in the branch is greater than the book value (e.g., due to accumulated losses or write-downs), the entity shall recognise a DTA, but only to the extent that it is probable that:
Under US tax rules, income in the branch is directly taxable to the owner. As a result, there generally should be no timing differences associated with the investment in the branch itself under US GAAP. However, timing differences may arise in relation to foreign currency movements. These are discussed later in this section.
The entity should record deferred taxes in its home country for the tax effects of foreign DTA and DTL because each would be expected to constitute a temporary difference in the home country deferred tax computation. More specifically, when a deferred foreign tax liability is settled, it increases foreign taxes paid, which in turn decreases the home country taxes paid as a result of additional foreign tax credits or deductions for the additional foreign taxes paid. Equally, when a deferred foreign tax asset in the foreign jurisdiction is recovered, it reduces foreign taxes paid, which increases the home country taxes as a result of lower foreign tax credits or deductions for foreign taxes paid.
In considering the amount of deferred taxes to be recorded in the home country as they relate to foreign DTA and DTL, an entity must consider how those foreign deferred taxes, when paid, will interact with the tax computations in the home country tax return. For example, in the US, a taxpayer makes an annual election to deduct foreign taxes paid or to take them as a credit against its US tax liability. In making this decision a taxpayer will need to consider a number of factors, including the interaction of the income and taxes of the foreign branch with the income and taxes of the entity's other branches and foreign corporations.
If the taxpayer expects to take a credit for the foreign taxes to be paid, it should record (before considering any related credit limitations) a home country DTA (DTL) for each related foreign DTL (DTA) at a rate of 100% for the amount of the foreign deferred taxes that are expected to be creditable (see example below).
If the foreign taxes that will be paid as the deferred taxes reverse are not expected to be fully creditable (e.g., in situations where the foreign tax rate exceeds the home country tax rate), unique considerations can arise. As a result, it may be appropriate to record home country deferred taxes on foreign country deferred taxes at a rate of less than 100% of the foreign deferred tax asset or liability, or under US GAAP it may be appropriate to record such deferred taxes at a rate of 100% with a valuation allowance for the portion of any net foreign deferred taxes that, when paid, result in credits that are expected to expire unutilised.
If the entity expects to deduct (rather than take a credit for) foreign taxes paid, it should establish in the home country jurisdiction deferred taxes on the foreign DTA and DTL at the home country enacted rate that is expected to apply in the period during which the foreign deferred taxes reverse.
If there is no net DTA in the foreign jurisdiction (e.g., due to a full valuation allowance under US GAAP), a corresponding DTL in the home country jurisdiction would generally be inappropriate.
Example
Background/facts
Taxes paid to Country X will be claimed as a foreign tax credit.
Question
What are the amounts of deferred income taxes to be recorded in the consolidated financial statements?
Analysis/conclusion
Because the branch is taxed in both Country X and Company P's home country, the taxable and deductible temporary differences in each jurisdiction must be computed. A DTA for the home country's tax effects of the foreign DTL associated with the depreciable property, as well as a DTL for the home country's tax effects of the foreign DTA associated with the reserves, would be included in the deferred tax balance. The effect of these foreign deferred taxes on the foreign taxes paid will, in turn, affect the home country tax liability as a result of the impact on future credits or deductions for foreign taxes paid.
This concept is illustrated below:
Accruals deductible when paid | $750 | $3,000 x 25% |
Depreciation | $(1,250) | ($5,000) x 25% |
Branch DTL, Net | $(500) |
Accruals deductible when paid | $1,200 | $3,000 x 40% |
Depreciation | $(2,000) | ($5,000) x 40% |
DTA on branch DTL, Net | $500 | $500 x 100%; presumes 100% foreign tax credit |
Home country DTL, | Net $(300) | |
Total DTA /(DTL) | $(800) |
Another area that must be considered is accounting for foreign currency movements in relation to foreign branches, including foreign currency movements on branches' temporary differences.
Under IFRS, a DTA (subject to the recognition test) or a DTL should be recognised on foreign currency movements on temporary differences related to a foreign branch. The resulting deferred tax is credited or charged to profit or loss.
Under US GAAP the effects of translating the financial account balances from the branch's functional currency to the parent's reporting currency, including foreign currency movements on temporary differences related to a foreign branch, should be recorded in the cumulative translation adjustments (CTA) account. In circumstances when the temporary differences associated with the translation adjustments of the foreign branch will not be taxed in the home country until there is a remittance of cash, for example, in the United States, a question arises as to whether or not an entity can apply an indefinite reversal assertion to the CTA of the branch.
We believe the answer depends upon which of two acceptable views the entity applies in its interpretation of the accounting literature. View 1 is that an indefinite reversal assertion is not available for a branch and View 2 allows for the application of an indefinite reversal assertion (when facts and circumstances permit). The views are summarised as follows:
View 1 — An exception to comprehensive recognition of deferred taxes only applies to outside basis taxable temporary differences related to investments in foreign subsidiaries and certain foreign corporate joint ventures. Because branch income is directly taxable to the owner or parent, there is technically no outside basis difference in the branch and therefore the exception is not applicable.
View 2 — In deliberating ASC 740, the FASB indicated that the underlying rationale for the exception to recognising deferred taxes related to investments in foreign subsidiaries is based on the inherent complexity and hypothetical nature of the calculation. However, application of the exception depends on an entity's ability and intent to control the timing of the events that cause temporary differences to reverse and result in taxable amounts in future years. In particular, the exception focuses on the expectation of owner or parent taxation in the home jurisdiction. If taxation of the CTA occurs only upon a remittance of cash from the branch, the timing of taxation can be controlled by the owner or parent. On that basis, an indefinite reversal assertion could be applied to the CTA of a foreign branch (even though the assertion could not apply to the periodic earnings of the branch since they pass through to the parent). This is not an 'analogous' temporary difference which would be prohibited; rather, it is in the scope of the exception. That is because such amount relates to a foreign operation and carries with it the same measurement complexities as any other foreign outside basis difference.
The view taken is an accounting policy that should be applied consistently. Accordingly, if View 1 is adopted, it would be applied to all of the company's foreign branches. If View 2 is adopted, indefinite reversal could be asserted for any branch for which the criteria are supportable by specific plans relating to the unremitted branch earnings. As a result, under View 2, an indefinite reversal assertion could be made and supported for one branch while not being made for another.
For a company applying View 2, other points to note are as follows:
The US Internal Revenue Service (IRS) has indicated that final regulations applying to foreign currency translation could be issued by the end of the calendar year. These regulations may impact US GAAP accounting for foreign currency movements in relation to branches as discussed above.
Andrew Wiggins +44-(0)-121-232-2065 andrew.wiggins@uk.pwc.com |
Kenneth Shives +32-(2)-710-4812 kenneth.shives@be.pwc.com |
Terry Tam +86-(21)-2323-1555 terry.sy.tam@cn.pwc.com |
Marjorie Dhunjishah +1-(703)-918-3608 marjorie.l.dhunjishah@us.pwc.com |
Country | Name | Telephone | |
Australia | Ronen Vexler | +61-(2)-8266-0320 | ronen.vexler@au.pwc.com |
Belgium | Koen De Grave | +32-(3)-259-3184 | koen.de.grave@be.pwc.com |
Brazil | Manuel Marinho | +55-(11)-3674-3404 | manuel.marinho@br.pwc.com |
Canada | Spence McDonnell Nicole Inglis |
+1-(416)-869-2328 +1-(604)-806-7781 |
spence.n.mcdonnell@ca.pwc.com nicole.f.inglis@ca.pwc.com |
China | Terry Tam | +86-(21)-2323-1555 | terry.sy.tam@cn.pwc.com |
Finland | Kaj Wasenius | +358-(20)-787-7302 | kaj.wasenius@fi.pwc.com |
France | Marine Gril-Gadonneix | +33-(1)-56-57-43-16 | marine.gril-gadonneix@fr.landwellglobal.com |
Germany | Heiko Schäfer | +49-(69)-9585-6227 | heiko.schaefer@de.pwc.com |
Hungary | David Williams | +36-(1)-461-9354 | david.williams@hu.pwc.com |
India | Pallavi Singhal | +91-(80)-4079-6032 | pallavi.singhal@in.pwc.com |
Italy | Marco Meulepas | +39-(02)-9160-5501 | marco.meulepas@it.pwc.com |
Japan | Masanori Kato | +81-(3)-5251-2536 | masanori.kato@jp.pwc.com |
Mexico | Fausto Cantu | +52-(81)-8152-2052 | fausto.cantu@mx.pwc.com |
Netherlands | Jurriaan Weerman | +31-(0)-887-925-086 | jurriaan.weerman@nl.pwc.com |
Poland | Jan Waclawek | +48-(22)-746-4898 | jan.waclawek@pl.pwc.com |
Romania | Mariana Barbu | +40-(21)-225-3714 | mariana.barbu@ro.pwc.com |
Singapore | Paul Cornelius | +65-6236-3718 | paul.cornelius@sg.pwc.com |
South Africa | Loren Benjamin | +27-(11)-797-5426 | loren.benjamin@za.pwc.com |
Spain | Alberto Vila | +34-(915)-685-782 | alberto.vila@es.pwc.com |
United Kingdom | Andrew Wiggins | +44-(0)-121-232-2065 | andrew.wiggins@uk.pwc.com |
United States | David Wiseman | +1-(617)-530-7274 | david.wiseman@us.pwc.com |
Andrew Wiggins +44-(0)-121-232-2065 andrew.wiggins@uk.pwc.com |
Steven Schaefer +1-(973)-236-7064 steven.schaefer@us.pwc.com |
Katya Umanskaya +1-(312)-298-3013 ekaterina.umanskaya@us.pwc.com |