1. Balance Sheet Presentation Rules
- IFRS (IAS 12): All deferred tax assets and liabilities must be classified as non-current on the face of the balance sheet, regardless of when the underlying temporary difference is expected to reverse. They cannot be mixed with current tax liabilities or tax receivables. Offset is permitted only if the entity has a legally enforceable right to set off current tax assets against current tax liabilities and they relate to income taxes levied by the same taxation authority.
- US GAAP (ASC 740): Aligned with IFRS; all deferred tax balances are presented as non-current assets or non-current liabilities.
2. Uncertain Tax Positions (FIN 48 / ASC 740 vs. IFRIC 23)
Companies often interpret complex tax laws aggressively, creating tax positions that tax authorities might challenge.
- US GAAP (Two-Step Model): An entity can only recognize the tax benefit from an uncertain position if it passes a recognition threshold showing it is more-likely-than-not that the position will be sustained upon examination. If met, the entity applies a measurement threshold to recognize the largest amount of tax benefit that has a greater than 50% cumulative probability of being realized.
- IFRS (IFRIC 23): Focuses on whether it is probable that the tax authority will accept an uncertain tax treatment. The entity reflects the effect of uncertainty using either the most likely amount method (for binary outcomes) or the expected value method (for a range of outcomes), assuming the tax authority will examine the positions with full knowledge of all relevant data.