TEI comments on FASB's guidance on intra-entity asset transfers.

• Position: Tax Executives Institute, Financial Accounting Standards Board

On May 18, 2015, TEI submitted comments to the Financial Accounting Standards Board concerning proposed updates to the FASB's guidance on intra-entity asset transfers. While TEI commended the FASB for its ongoing simplification initiative, which was the asserted basis for the proposed updates, the Institute disagreed with the FASB's proposed updates for a number of reasons, including TEI's view that the proposal would increase the risk of earnings management or manipulation and further complicate the analysis of deferred tax items, resulting in increased costs to financial statement preparers with no corresponding benefits to users of financial statements. TEI's comments were prepared under the aegis of TEI's Financial Reporting Committee, whose chair is Eric Johnson. TEI's Chief Tax Counsel, Patrick Evans, coordinated the preparation of the comments.

On January 22, 2015, the Financial Accounting Standards Board (FASB) released an exposure draft of two proposed accounting standards updates to Income Taxes (Topic 740). The proposed updates pertain to intra-entity asset transfers, File Reference No. 2015-200, and balance sheet classification of deferred taxes, File Reference No. 2015-210. Both updates are part of the FASB's ongoing simplification initiative launched in June 2014 to reduce cost and complexity of complying with U.S. Generally Accepted Accounting Principles (GAAP) while maintaining or improving the usefulness of information provided to users of financial statements. Tax Executives Institute (TEI or the Institute) commends the FASB for undertaking the simplification initiative and is pleased to submit the following comments on the proposed accounting standards update concerning intra-entity asset transfers.

TEI Background

TEI is the preeminent worldwide association of corporate tax executives. Our nearly 7,000 members are accountants, attorneys, and other business professionals employed by approximately 3,000 of the leading companies in North and South America, Europe, and Asia. TEI represents a cross-section of the business community and is dedicated to the development and implementation of sound tax policy and tax accounting principles, as well as to promoting the uniform and equitable enforcement of the tax laws. The Institute is proud of its record of working with congressional committees, government agencies, and other policy-making bodies, including the Securities and Exchange Commission, the Financial Accounting Foundation, and the FASB on tax and tax accounting matters. These efforts inure to the mutual benefit of the government, business taxpayers, preparers and users of financial statements, and ultimately the public at large.

TEI members are responsible for conducting the tax affairs of their companies, ensuring their compliance with the tax laws, and preparing financial disclosures of tax related matters. Most of the companies represented by our members issue financial statements that are governed by the FASB's pronouncements, and, of those, most are SEC registrants. For companies governed by other accounting standards, such as International Financial Reporting Standards, the FASB's work is also critical since FASB pronouncements are often referenced by other accounting standards' boards. In addition, they are subject to scrutiny by the IRS and various other agencies in the United States and foreign jurisdictions on a continual basis.

As a professional association of in-house tax executives, TEI offers a...