Robert J. Barish
Senior Vice President and Controller
One Verizon Way, 4th Floor
Basking Ridge, NJ 07920
Tel:
(908) 559-1629
robert.barish@verizon.com
July 30, 2009
Technical Director
International Accounting Standards Board
30 Cannon Street
London, EC4M 6XH
United Kingdom
Re: Exposure Draft – Income Tax
Dear Sir/Madam:
Verizon Communications Inc. (Verizon) is pleased to provide comments on the Exposure Draft –
Income Tax (Exposure Draft). The following is an overview of our views on the Exposure Draft.
Verizon is a large telecommunications company with operations principally in the U.S. However,
Verizon also has operations in over 40 countries, with operating companies and assets in Europe, the
Middle East, Africa, Asia, Australia, Latin America and Canada. Therefore, we are sensitive to
global competitive factors and global accounting matters. In this regard, we provided comments to
the United States Securities and Exchange Commission (SEC) on the SEC’s Roadmap to
International Financial Reporting Standards (IFRS) transition in the United States which were very
supportive of United States public companies adopting IFRS in the near future. Consequently, we
believe it is critical for convergence activities such as the overall project on income taxes to result in a
high-quality accounting standard that can be applied globally by companies with assets and customer
bases of varying size and complexity.
Overall, we have great difficulty supporting the current direction of the International Accounting
Standards Board (IASB) and the United States Financial Accounting Standards Board (FASB) in
general with respect to the joint project on income taxes, and specifically, supporting the IASB in
issuing the Exposure Draft. The Exposure Draft and related Basis for Conclusions describe the status
of the joint project as clearly not reaching or potentially reaching a converged accounting principle.
While differences were addressed, as summarized in paragraphs BC130 to BC134, and several
potentially eliminated by the Exposure Draft, we believe there are critical differences that remain,
including those that the FASB tentatively addressed until subsequently deciding not to amend
Statement of Financial Accounting Standards No. 109 – Accounting for Income Taxes (SFAS No.
109). We strongly believe, given the momentum of the IASB and FASB in driving toward converged
accounting standards, that the Exposure Draft should be withdrawn and a joint exposure draft should
be issued eliminating the remaining differences, particularly those described in paragraph BC133 and
BC134, including uncertain tax positions, deferred taxes on permanent investments and leveraged
leases, among other differences.
Technical Director
July 30, 2009
Page 2
While the Exposure Draft represents positive movement towards a more consistent framework for
accounting for income taxes, we believe the continuing lack of convergence will represent an example
for preparers and users of financial information, as well as the SEC, to highlight the difficulties in
developing high-quality, global accounting standards, thereby delaying or otherwise detracting from
the SEC’s proposed roadmap to IFRS transition in the United States. We also believe that the
proposed changes to International Accounting Standard 12 – Income Taxes (IAS 12) are significant
enough to warrant further convergence effort in order to achieve full convergence. In other words, the
proposed changes to IAS 12 described in the Exposure Draft that would eliminate many differences
between current IAS 12 and SFAS No. 109 (including related interpretations) such that adopting the
proposed rules by an IFRS preparer would represent a substantial change to their current income tax
accounting without the benefit of achieving convergence. Consequently, further changes, which
could be significant, would likely be necessary in order to achieve full convergence on the part of
both IAS 12 and SFAS No. 109 (and related interpretations).
As a global enterprise interested in accounting rules developed by both the IASB and the FASB, we
are concerned that joint projects, such as the joint project on income taxes, will lose momentum as
differences may be considered too great to overcome. It became clear to preparers and users that
significant convergence efforts by the IASB and FASB would be required to result in a single, highquality set of accounting standards and conceptual differences would need to be eliminated, as
outlined by the SEC in its proposed roadmap to IFRS transition in the United States. We strongly
believe that, in order for United States preparers and users of financial information to understand and
accept a common set of global accounting standards and effectively transition to IFRS, the IASB and
FASB will need to work harder in searching for common ground on conceptual differences of opinion
in order to have any hope of achieving convergence. And we do not believe this means adopting all
or the majority of either SFAS No. 109 or IAS 12, but rather a reasonable, operational approach from
both standards. For example, accounting for uncertain tax positions should be similar for United
States preparers and international preparers that report using IFRS. However, there remains a
conceptual difference principally in applying a more likely than not standard compared to a
probability-weighted average. Both are reasonable approaches that have merit. So in similar
circumstances that such an estimated measurement is required, we believe the IASB and FASB
should either together choose a single approach and issue a proposed standard on that basis, or both
options should be permitted with clear disclosures required. Furthermore, we believe the approach of
allowing two options that are both acceptable is consistent with principles-based accounting
standards.
We would be pleased to discuss our views and specific comments related to this Exposure Draft at
your convenience. You can contact me at (908) 559-1629 or Mark Kearns at (908) 559-2529 or
mark.f.kearns@verizon.com regarding this matter.
Very truly yours,
Robert J. Barish
Senior Vice President and Controller – Verizon Communications Inc.
cc:
Ernst & Young LLP