income taxes

On October 24, 2016, the FASB issued Accounting Standards Update No. 2016-16, Income Taxes (Topic 740): Intra-Entity Transfers of Assets Other Than Inventory. For public business entities, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2017, and will be eligible for testing on the CPA Examination in July 2018.

Current GAAP prohibits the recognition of current and deferred income taxes for an intra-entity asset transfer until the asset has been sold to an outside party, which is an exception to the principle of comprehensive recognition of current and deferred income taxes in GAAP.

The FASB determined that an entity should recognize the income tax consequences of an intra-entity transfer of an asset other than inventory when the transfer occurs; therefore, this Update eliminates the exception for an intra-entity transfer of an asset other than inventory. ASU No. 2016-16 provides two examples of assets subject to the amendments in the Update: intellectual property and property, plant, and equipment. (The FASB decided not to change GAAP for an intra-entity transfer of inventory due to cost-benefit concerns.)

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