Ifrs for Smes

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IFRS Income Tax Accounting

IFRS for SMEs: A less taxing standard?

On July 9, 2009, the IASB published the International Financial Reporting Standard for Small and Medium-sized Entities (“IFRS for SMEs” or “the standard”), a self-contained standard of about 230 pages designed to ease the burden of IFRS reporting for entities that do not have public accountability. Globally, more jurisdictions may be encouraged to replace existing local GAAP with IFRS for SMEs. As a result, it holds important implications for US companies with multinational subsidiaries. The United Kingdom Accounting Standards Board (UK ASB), for example, has already issued a Consultation Paper asking for comments on its proposal to replace existing UK GAAP with IFRS
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This exception is similar to the guidance in the Exposure Draft, which is similar to the US GAAP approach. PwC Observation A close look at the guidance in the standard reveals that the wording specifically refers to “unremitted earnings” from foreign entities. This differs from the current guidance under US GAAP and the existing and proposed guidance under IFRS. Because unremitted earnings are only one part of the outside basis difference, the results under IFRS for SMEs could differ from other guidance. It is unclear whether this was an intended difference. Further, respondents generally did not agree with the IASB’s proposal to limit the exception to investments in foreign entities. Many respondents believe there is no significant difference in complexity between foreign and domestic subsidiaries, and suggest the exception should include both.

Intraperiod allocation
The standard generally requires companies to recognize tax expense in the same component of total comprehensive income (i.e., continuing operations, discontinued operations, or other comprehensive income) or equity as the transaction or other event that resulted in the tax. In other words, the standard requires a backward-tracing approach, consistent with existing IFRS. US
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