United States

Balance sheet classification of deferred taxes

FINANCIAL REPORTING INSIGHTS  | 

Current generally accepted accounting principles require an entity to separate deferred income tax liabilities and assets into current and noncurrent amounts in a classified statement of financial position. Stakeholders informed the Financial Accounting Standards Board (FASB) that this requirement results in little or no benefit to users of financial statements. As a result, the FASB recently issued Accounting Standards Update (ASU) 2015-17, Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes. The ASU concludes that deferred tax liabilities and assets should be classified as noncurrent in a classified statement of financial position. However, an entity shall not offset deferred tax liabilities and assets attributable to different tax-paying components of the entity or to different tax jurisdictions.

Public business entities must apply the new requirements for annual periods beginning after December 15, 2016, and interim periods within those annual periods. All other entities must apply the new requirements for annual periods beginning after December 15, 2017, and interim periods within annual periods beginning after December 15, 2018. All entities have the option of adopting the new requirements early as of the beginning of an interim or annual reporting period.