TEI comments on PIR of ASC 740.

• Position: Tax Executives Institute, Financial Accounting Standards Board Statement No. 109 on Accounting for Income Taxes

On June 10, 2013, TEI submitted the following comments to the Financial Accounting Foundation (FAF) in connection with the FAF's post-implementation review of Financial Accounting Standards Board Statement No. 109, Accounting for Income Taxes (codified as ASC 740). In addition, hundreds of individual TEI members submitted anonymous comments to the FAF using a web-based, electronic survey. In general, TEI's comments concluded that ASC 740 provides useful information to readers of financial statements, but there are a number of problematic rules within the standard that should be refined or eliminated if ASC 740 is to remain an understandable standard that can be applied as intended and result in the reporting of reliable income tax information. The comments, which took the form of a letter from TEI President Carita R. Twinem to FAF President Theresa S. Polley, were prepared under the aegis of TEI's Financial Reporting Committee. Patrick Evans, TEI Chief Tax Counsel, serves as legal staff liaison to the Committee and coordinated the preparation of TEI's comments.

TEI Background

Tax Executives Institute is the preeminent global association of in-house 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 the United States, Canada, 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 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 Public Company Accounting Oversight Board and the Securities and Exchange Commission, to minimize the cost and burden of tax administration and compliance to the mutual benefit of the government, business, and ultimately the public. We also support efforts to ensure that companies fairly present their financial position in financial statements prepared for investors and in documents filed with the SEC.

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 Fiscal 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 unique perspective. Its members work for companies involved in a wide variety of industries, and thus, their collective perspectives are broad-based and not tied to any particular special interest group. Further, TEI members are responsible for both the tax affairs of their employers and the reporting of tax information in their employers' financial statements. Thus, they are well-versed in the complexities of the tax laws, as well as the financial accounting rules. We believe the diversity, background, and professional training of TEI's members place us in a uniquely qualified position from which to comment on ASC 740. Along with the government and the investing public, our members have the most at stake in trying to craft a financial reporting system that fairly presents the results of company operations and is as administrable and efficient as possible.

Tax Executives Institute commends the FAF for instituting a post-implementation review of ASC 740. Much has changed since the income tax accounting standard was issued in February 1992. Companies have shifted significant...