Dual Reporting for Equity and Other Comprehensive Income under IFRS and U.S. GAAP

8 PRESENTATION OF TAXES ON EQUITY ITEMS

8.1 INTRAPERIOD TAX ALLOCATION TO EQUITY

8.1.1 Definition of Intraperiod Tax Allocation

Under Subtopic 740–20 (FASB Statement No. 109), as a general rule, the difference between total income tax expense or benefit and income tax calculated on income from continuing operations is allocated to all items other than continuing operations, such as discontinued operations, extraordinary items, cumulative effect of a change in accounting principle, other comprehensive income, prior period adjustments, and other items recognized directly in stockholders' equity. Intraperiod tax allocation is the U.S. GAAP term for this process of allocation.¹

Comment: IFRSs do not use the expression “intraperiod tax allocation.” However, as a matter of fact, IFRSs also apportion income tax to the different items of income and expenses.

Intraperiod tax allocation is one of the topics of the Financial Statement Presentation Project² as well as of the short-term convergence project on income tax. Opponents of intraperiod tax allocation claim that, by definition, any related procedure is arbitrary, even when the allocation rules are unambiguous, as may be the case under U.S. GAAP. Furthermore, on certain occasions it may be simpler not to trace backwards. The typical example is a change in valuation allowance related to a loss carry forward that arose in a previous period from losses recognized in different components of comprehensive income or equity.³ This perspective ...