Compare how IFRS and local GAAP frameworks affect tax treatment across countries. Understand the bridge between bookkeeping and tax filing.
| United States | Germany | |
|---|---|---|
| Accounting Framework | US GAAP | HGB |
| IFRS Adopted | No | Yes |
| Regulatory Body | FASB | DRSC |
| Inventory Methods | LIFO allowed | LIFO allowed (rare) |
| R&D Treatment | Expense as incurred | Option to capitalize |
| Lease Tax Treatment | ASC 842 dual model | Old lease rules for tax |
| Depreciation for Tax | MACRS (statutory) | AfA-Tabellen |
In many countries, taxable income starts from accounting profit. The accounting framework used — whether IFRS, US GAAP, or a local standard like Germany's HGB — directly affects how income and expenses are measured. Understanding these differences is essential for accurate cross-border tax planning.
IFRS uses economic useful life; many countries prescribe fixed tax depreciation rates that differ significantly.
IFRS prohibits LIFO; US GAAP allows it, creating a tax advantage through lower taxable income in inflationary periods.
IFRS 16 puts operating leases on balance sheet, but tax treatment in most countries still follows the old rent deduction model.
IFRS requires capitalizing development costs; many countries offer additional tax credits or super-deductions.
Accounting provisions may not be tax-deductible until actually paid, creating temporary differences.
IFRS 15 performance obligations may differ from when tax authorities consider revenue earned.
Businesses with related-party transactions across borders must price them at arm's length. The OECD provides five accepted methods:
Groups with consolidated revenue exceeding EUR 750M must file Country-by-Country Reports (BEPS Action 13).
Over 100 jurisdictions participate in the OECD's automatic exchange of financial account information. Financial institutions report accounts held by foreign tax residents to local authorities, who share the data with the account holder's home country. The US participates through FATCA instead of CRS.
This information is provided for educational purposes only and does not constitute professional accounting or tax advice. Standards and rules change frequently. Always consult a qualified professional for your specific situation.