FASB Decision to change Income Tax Accounting for Intra-entity Assets Transfers
FASB decided to require an entity to recognize income tax impact of an intra-entity asset transfer, other than an intra-entity asset transfer of inventory.
An intercompany sale or purchase of assets between entities in different taxing jurisdictions is a taxable event for the seller and a new tax basis for the buyer. Under current guidance under ASC 810 and 740, intra-entity balances, transactions, and profit or loss on assets remaining within the consolidation group be eliminated and the related tax impacts (i.e., tax payable on gain by the seller and deferred tax asset related to tax basis adjustment to buyer) are not recognized for US GAAP based financial statement purposes.
However, this non-recognition treatment will be eliminated from US GAAP, except for intra-entity asset transfer of inventory. This amendment is expected to be effective annual reporting periods beginning after December 15, 2017 for public entities and December 15, 2018 for all other entities. Early adoption is permissible.
Please see the attached FASB meeting minute below.