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1. Tax is only a small part of the IFRS conversion process, so it is not going to be a big exercise for my Tax department.
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2. I should only consider the proposals in the IASB's exposure draft on accounting for income taxes in my conversion plan.
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3. My Tax group should not get involved in the conversion until my Accounting group has identified GAAP differences.
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If you answered "true" to one or more question(s), you may be underestimating the planning requirements of a successful IFRS implementation:
1. Converting to IFRS will be a big job for your Tax group. Among other things, you may need to implement new tax processes and procedures to reconcile and repost the expanded disclosure requirements related to deferred taxation. Your company's IT systems may need to be modified to capture and track the new data necessary for financial reporting and preparing tax returns.
2. Exposure Draft on Income Taxes – Not Proceeding. The International Accounting Standards Board (IASB) released the much-anticipated changes to the IFRS standard on accounting for income taxes in an exposure draft released on March 31, 2009, which would replace the existing standard, IAS 12, Income Taxes. The IASB held a joint meeting with the US Financial Accounting Standards Board (FASB) on October 26 - 28, 2009, where the boards discussed a number of topics, including income taxes. At this meeting, as noted in the IASB/FASB joint statement (see the IASB/FASB website to access the document) issued on November 5, 2009, the boards considered a summary of the comments received by the IASB in response to the proposals for a revised Income Taxes standard. The boards agreed that the project should not proceed in its current form. Given this information, the existing standard, IAS 12, is the standard that companies should be focusing on in their IFRS conversion plans.
3. Don't delay. Remember that many IFRS standards affect tax reporting. The potential effect of IFRS on an enterprise's income taxes goes well beyond IAS 12. Tax professionals will need to understand the impact of all IFRS adjustments, both on adoption of IFRS and on an ongoing basis. Therefore, your tax group should prepare for the conversion in advance of your Accounting group's identification of GAAP differences. An early understanding of the impact on your company's effective tax rate will be important for both communicating the effects of IFRS to stakeholders and recasting financial budgets and forecasts.
For these reasons and more, the qualifications and preparation of your IAS 12 project team is critical. KPMG has been proactive in informing tax directors across Canada and the world about the unique tax issues involved in IFRS adoption. For a review of some of these issues, review TaxNewsFlashCanada 2010-01 and KPMG’s Webcast Replay: The Clock is Ticking – Accounting for Taxes in Your IFRS Conversion Plan.
This Web page is designed to provide you with news and information to help you and your Tax department manage the conversion to IFRS for tax accounting and reporting purposes. If you want to learn more or need assistance, please contact your KPMG adviser or the Managing Partner at a KPMG office near you. For general information on IFRS conversion matters, visit the IFRS main site.