The Financial Accounting Standards Board has promised it will re-examine some of the more vexing areas of tax accounting, including the accounting around transfer pricing, as a result of a review of how existing accounting rules are working in practice.

FASB Chairman Russ Golden said a post-implementation review of Financial Accounting Statement No. 109, Accounting for Income Taxes, offers some important feedback on the costs and benefits of the standard following extended use of the rule. FAS 109 was adopted in 1992 to set new standards on how companies should reflect taxes in their financial statements, especially tax assets and liabilities arising from differences between tax and financial reporting rules.

A review conducted by the Financial Accounting Foundation, FASB's overseer, found that FAS 109 generally met the objectives of the standard-setting effort, but has done little to cut through complexity associated with accounting for income taxes. The review was not conclusive on whether persistent complexity is the result of FAS 109 requirements, changes in business and tax laws over the two decades since it was written, or some combination.

In a letter to FAF, Golden says FASB plans to review some of the issues raised in the report and consider whether new guidance is warranted. Golden says the board also will look at complexities around intercompany transfers of assets, where subsidiaries of a single company, for example, might buy and sell goods within the corporate family but across tax jurisdictions. “We plan to seek input from stakeholders to understand the specific difficulties in this area,” he says. Likewise, FASB plans to look at earnings that are indefinitely reinvested in foreign subsidiaries, an area where the Securities and Exchange Commission has called on companies to be more forthright with investors.

With respect to intraperiod tax allocation, such as allocating taxes to continuing vs. discontinued operations, Golden acknowledges the challenge for preparers of financial statements. “We plan to seek input from stakeholders about whether there are any cost-effective solutions that would reduce complexity without reducing the usefulness of the information,” he wrote. The board also will consider the suggestions in the context of an open project on reporting discontinued operations.

As part of its outreach to consider whether there are cost-effective solutions to concerns raised, FASB also will explore the priority it should give to any possible changes to tax accounting compared with other projects already on the board's agenda, Golden said.