Monday, December 8, 2008

Will your IFRS conversion be taxing?

Will you be paying more or less taxes under IFRS?

I posed this question several weeks ago in this blog after listening to a US webinar.

The message is that taxation may be not one devil but several devils. Yes we are expecting a new standard on taxes from the IASB. According to the IASB we are lead to believe that and Exposure Draft on Income Taxes will come out from the IASB very shortly.

An Exposure Draft of an IFRS to replace IAS 12 is expected to be published by the IASB in 2008. A standard is planned to be finalised in 2010. The FASB has suspended indefinitely deliberations on the Income Tax project. The FASB has no plans to issue an amendment to Statement 109 at this time. The FASB may revisit this project after the IASB further develops its replacement to IAS 12, Income Taxes.

The aim of the project is to achieve a degree of convergence with FAS 109. It is part of the Norwalk Agreement on US GAAP/IFRS convergence.

We are awaiting this Exposure Draft and it will be interesting. I have pointed to resources in earlier posts. You should look at the websites of accounting firms for a further discussion of this issue. Undoubtedly we can expect more analysis very soon.

However, there are tax consequences of IFRS adoption that go beyond debits and credits and disclosure. There may be an impact on actual taxes payable.

This coming Thursday, December 11 at 11.30 am E.T. PwC USA will be presenting a 1 1/2 hour seminar on the tax consequences of IFRS.

It will cover:

Tax accounting methods, including LIFO, leases, advance payments, and component depreciation

International tax planning, including global structuring, debt planning, cash repatriation, and foreign tax credits

Transfer pricing planning and documentation

Compensation, benefits, and human resources

Learn which aspects of your tax function may be most impacted by IFRS and what you should consider as you plan for conversion.

You can sign up for the webinar through the PwC US website

The seminar will be presented from a US perspective and of course there are differences in accounting and tax. One difference is that LIFO is not permitted in Canada for accounting or tax. In the US it is an institution. You can use LIFO for tax if it is booked for accounting. Like Canadian GAAP LIFO is not permitted for financial statement reporting. There are likely other differences. However, there are issues for subsidiaries in different jurisdictions that will apply to Canadian companies as well. There will be many lessons for us in Canada. Of course bear in mind there will be differences from our Canadian tax laws. But the message is similar. There should be an early identification of potential tax problems and tax planning opportunities. Nobody needs surprises!

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