Accounting for income taxes: Current and deferred taxes

This whitepaper is the third in a series of whitepapers to be used as a resource in understanding and analyzing the accounting for income taxes under FASB Accounting Standards Codification (ASC) 740, Income Taxes. This whitepaper addresses determining the current taxes payable or refundable, deferred tax assets and liabilities, which form the basis for the amounts recorded on the entity’s financial statements. ASC 740 takes a balance sheet approach to income tax calculations and thus the amounts recorded in the income statement are generally the differences between the income tax amounts on the current and prior year balance sheets. This whitepaper also addresses the rate reconciliation which is not only a required public company financial statement disclosure but also is an important check on the reasonableness of the amounts recorded within the financial statements. This whitepaper does not address every aspect of accounting for income taxes and should therefore be read in conjunction with ASC 740, Income Taxes.