Accounting

Accounting for Income Taxes: Uncertain Tax Positions in Transfer Pricing (Portfolio 5004)

  • This Portfolio provides an overview of the two-step process required under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740-10

Description

Tax Portfolio 5004, Accounting for Income Taxes: Uncertain Tax Positions in Transfer Pricing (Accounting Policy and Practice Series), provides an overview of the two-step process required under Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740-10 (formerly FASB Interpretation No. 48 (FIN 48)) and its application to transfer pricing. The Portfolio provides guidance on determining the units of account and identifying uncertain tax positions; recognizing uncertain tax positions; and evaluating the arm’s-length nature of intercompany pricing. It further explains measurement analyses; disclosures; and the key stakeholders affected by ASC 740-10 in relation to transfer pricing.

The first part of the Portfolio discusses ASC 740-10 and its application to transfer pricing, including a brief overview of the transfer pricing regulatory environment. The second part of the Portfolio explains the authors’ approach to determining the unit of account for a transfer pricing position, identifying and documenting uncertain tax positions, and applying initial filters. The third part of the Portfolio discusses the recognition of uncertain tax positions. The fourth part of the Portfolio covers evaluating the arm’s-length nature of intercompany pricing, specifically, key considerations when evaluating transfer pricing exposures. The fifth part of the Portfolio explains ASC 740-10‘s measurement requirements; how to identify information relevant to analyzing potential exposure; use of and framework for a preliminary test; and defining scenarios for transfer pricing. The sixth part of the Portfolio discusses disclosures in detail, particularly, interest and penalties; tabular reconciliations, quarterly and annual disclosures; “early warning” disclosures; the impact of court decisions; and compliance considerations. The seventh, and final, part of the Portfolio focuses on the responsibilities of the tax team, accounting team, and company executives as they relate to ASC 740-10 and transfer pricing.

This Portfolio may be cited as Tax Portfolio 5004, Desmond, Johnson, and Schuette, Accounting for Income Taxes: Uncertain Tax Positions in Transfer Pricing (Accounting Policy and Practice Series).

Table of Contents

I. Overview of ASC 740-10 and Its Application to Transfer Pricing
II. Units of Account and Identifying Uncertain Tax Positions Related to Transfer Pricing
III. Recognition of Uncertain Tax Positions Related to Transfer Pricing
IV. Evaluating the Arm’s-Length Nature of Intercompany Pricing
V. Measurement Analyses
VI. Disclosures
VII. Stakeholders Who Need to Know About ASC 740-10 and Transfer Pricing

desmond-christopher-2015
Christopher Desmond
Tax Partner
PwC
michelle-johnson
Michelle Johnson
Director
Duff & Phelps
schuette-mark-2015
Mark Schuette
Managing Director
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