European Financial and Accounting Journal 2014, 9(4):86-109 | DOI: 10.18267/j.efaj.132

Transition from US GAAP to IFRS: Analysis of Impact on Income Tax Administration in USA

Jana Roe
Jana Roe, Ph.D., CPA - Lecturer; Faculty of Finance and Accounting, University of Economics, Prague, W. Churchill Sq. 4, 130 67 Prague, Czech Republic; <xroej900@vse.cz>.

When SEC and FASB started considering replacing US GAAP with IFRS, the impact of this change had to be considered by the various stakeholders in the financial reporting process in the U.S., including the various preparers and users of financial statements, including the Tax Administration, IRS. Since 2009, taxpayers in the U.S. are allowed to use IFRS as a starting point for reconciliation of book results to taxable income or loss, an option utilized by approximately 200 companies in that year. In 2010, TIGTA issued a report describing the state of preparedness for the potential transition from US GAAP to IFRS, outlining activities such as education of field agents, technical analysis of the potential impact of changes to financial reporting standards, consultation of current issues related to IFRS with taxpayers and preparers. Specific technical tax issues related to transition from US GAAP to IFRS include LIFO, leasing, component depreciation, and uncertain tax positions; non-technical tax issues related to IFRS adoption include taxpayer and agent education, regulatory adjustments, developing new audit strategies. In addition to federal tax considerations, state tax authorities and taxpayers are preparing for the impact of IFRS adoption on state and local tax administration, impacting issues such as sales, property, and payroll apportionment and equity-based taxes. The main research questions relate to empirical research related to the micro and macro economic impact of the transition from US GAAP to IFRS.

Keywords: Financial reporting standards, IFRS, IRS, LIFO, Tax administration, TIGTA, US GAAP
JEL classification: H25, M41

Published: December 1, 2014  Show citation

ACS AIP APA ASA Harvard Chicago IEEE ISO690 MLA NLM Turabian Vancouver
Roe, J. (2014). Transition from US GAAP to IFRS: Analysis of Impact on Income Tax Administration in USA. European Financial and Accounting Journal, 9(4), 86-109. doi: 10.18267/j.efaj.132
Download citation
  • BibTeX (.bib)
  • Bookends (.ris)
  • EasyBib (.ris)
  • EndNote (.enw)
  • EndNote 8 (.xml)
  • ISI WoS (.isi)
  • Medlars (.medlars)
  • Mendeley (.ris)
  • MODS (.xml)
  • Papers (.ris)
  • RefWorks (.txt)
  • RefManager (.ris)
  • RIS (.ris)
  • MS Word (.xml)
  • Zotero (.ris)
    • Open full article

    References

    1. Blaylock, B. S. - Gaertner, F. B. - Shevlin, T. J. (2013): The Association between Book-Tax Conformity and Earnings Management (September 12, 2013). Review of Accounting Studies, Forthcoming. Go to original source...
    2. Bothwell, J. L. (2009): Adopting international financial reporting standards for use in the United States: an economic and public policy perspective. FASB.
    3. Chan, K. - K. Lin - P. Mo (2010): Will a departure from tax-based accounting encourage tax noncompliance? Archival evidence from a transition economy. Journal of Accounting and Economics vol. 50, no. 1, pp.58-73. Go to original source...
    4. Deloitte (2009, January): IFRS Insights. Retrieved December 15, 2012, from Deloitte.com: www.deloitte.com
    5. FASB (2013): Convergence with the International Accounting Standards Board (IASB). <http://www.fasb.org/intl/convergence_iasb.shtml>
    6. Hail, L. - Leuz, C. - Wysocki, P. (2009): Global accounting convergence and the potential adoption of IFRS by the United states: an analysis of economic and policy factors. Independent research report to the FASB.
    7. Hanlon, M. - E. Maydew - T. Shevlin (2008): An unintended consequence of book-taxconformity: A loss of earnings informativeness. Journal of Accounting and Economics, vol. 46, no. 2-3, pp.294-311. Go to original source...
    8. IBISWorld (2014): Global Accounting Services Market Research, <www.ibisworld.com/industry/global/global-accounting-services.htm>
    9. IRS (2010, September 10): Actions Are Being Taken to Address the Impact That International Financial Reporting Standards Will Have on Tax Administration. <http://www.treasury.gov/tigta/auditreports/2010reports/201030112fr.pdf>
    10. IRS.gov (2011, November 5): Legal Advice 20114702F. <www.irs.gov>
    11. Jackling, B. - Howieson, B. - Natoli, R. (2012): Some implications of IFRS adoption for accounting education. Australian Accounting Review, vol. 22, no. 4, pp. 331-340. Go to original source...
    12. Jaggi, B. - Low, P. (2000): Impact of culture, market forces, and legal system on financial disclosures. The International Journal of Accounting, vol. 35, no. 4, pp. 495-519. Go to original source...
    13. Leuz, C. - Pfaff, D. - Hopwood, A. (2010): The economics and politics of accounting: international perspectives on research trends, policy and practice. Oxford University Press.
    14. Mulford, C. - Comiskey, E. (2008, December 14): The potential consequences of the elimination of LIFO as a part of IFRS convergence. Retreived October 10, 2014, <https://smartech.gatech.edu/handle/1853/ 26316>.
    15. Mulyadi, M. - Soepriyanto, G. - Anwar, Y. (2012): IFRS adoption and taxation issues. International Journal of Arts and Commerce, vol. 1, no. 7, pp. 159-165.
    16. Nobes, C. - Parker, R. (2012): Comparative International Accounting. Engelwood Cliffs, NJ: Prentice-Hall.
    17. Nobes, C. - Schwencke, H. (2006): Tax and financial reporting links: a longitudinal examination over 30 years up to IFRS adoption, using Norway as a case study. European Accounting Review, vol. 15, no. 1, pp. 63-87. Go to original source...
    18. PWC (2013, April): IFRS status by country. <http://www.pwc.com/us/en/issues/ifrs-reporting/publications/ifrs-statuscountry.jhtml>
    19. PWC (2014, February): IFRS in the US:The importance of being financially bilingual. <http://www.pwc.com/en_US/us/issues/ifrsreporting/publications/assets/pwc-ifrs-in-the-us-the-importance-of-beingfinancially-bilingual.pdf>
    20. Ratcliffe, T. A. (2007): The Finer Points of Fair Value. Journal of Accountancy, vol. 103, no. 12, pp. 30-36.
    21. SEC. (2014) www.sec.gov
    22. Seidler, L. J. (1991): Technical issues in international accounting. Multinational Accounting: A Research Framework for the Eightees.
    23. Smith, K., A (2009): Cost-Benefit Analysis of the Transition from GAAP to IFRS in the United States (2009). Honors Projects in Economics. Paper 9. http://digitalcommons.bryant.edu/honors_economics/9
    24. Spalding, A. (2011): Mark-to-market and the widening gap between financial and tax accounting. Global journal of business research, vol. 5, no. 1, pp. 125-137.

    This is an open access article distributed under the terms of the Creative Commons Attribution 4.0 International License (CC BY 4.0), which permits use, distribution, and reproduction in any medium, provided the original publication is properly cited. No use, distribution or reproduction is permitted which does not comply with these terms.


    Return to the content