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Three important differences exist between U.S. tax issues and IFRS:

1. FASB Interpretation (FIN) 48;
2. the use of the last-in, first-out (LIFO) method of valuing inventories; and
3. deferred taxes.

FIN 48, which is currently only applicable for public companies, requires financial statement recognition of uncertain tax positions taken by a company that may not be sustainable upon tax examination. No such standard exists in IFRS.

LIFO is a permissible basis of accounting for GAAP and U.S. tax. LIFO is not permitted under IFRS. Under IFRS, inventory-writedowns can be reversed if the factor causing the write-down is no longer applicable; no such provision exists under U.S. GAAP or tax.

Under IFRS, deferred tax assets are recognized only if realization of the tax benefit is probable. Under U.S. GAAP and tax, deferred tax assets are always recognized, but a valuation allowance is provided unless realization is “more likely than not”.  Both IFRS U.S. GAAP and tax uses the enacted tax rate in calculating deferred taxes. Under IFRS, the classification of deferred tax assets and liabilities on the balance sheet is always considered to be non-current while under U.S. GAAP and tax, the classification is split between the current and non-current components.

If you’d like to learn more about IFRS and your business, please contact me. (bvanarnum@withum.com)