We have recently updated the following four Financial Reporting Insights, which provide guidance on accounting for income taxes under the Financial Accounting Standards Board Accounting Standards Codification (ASC) 740, Income Taxes.
- Accounting for income taxes—Book vs. tax basis differences. This Financial Reporting Insights addresses the accounting for book versus tax basis differences that arise when the carrying amount of an asset or liability differs from its tax basis. These differences can result in temporary or permanent differences between book and taxable income. This paper also discusses carryforwards, which are tax attributes that can be used to offset future taxable income (e.g., net operating losses, capital losses and tax credits).
- Accounting for income taxes—Determining the applicable tax rate. This Financial Reporting Insights explains how to determine the applicable income tax rate that is used to calculate the amount of current taxes payable or refundable, deferred tax assets and deferred tax liabilities. The scope of this publication includes identifying the entity’s federal (national) tax rate, any state, local and foreign tax rates, as well as the impact of changes in these rates and alternative tax systems, such as alternative minimum taxes.
- Accounting for income taxes—Current and deferred taxes. This Financial Reporting Insights addresses how to determine current taxes payable or refundable, deferred tax assets and deferred tax liabilities, which form the basis for the income tax amounts recorded on an entity’s financial statements. This publication also discusses the effective tax rate reconciliation disclosure requirements.
- Accounting for income taxes—Valuation Allowance. This Financial Reporting Insights is intended to be used as a resource in understanding and analyzing the realizability or recoverability of deferred tax assets. Deferred tax assets may require a valuation allowance to be recorded to reduce the deferred tax asset to the amount that is expected to be realized. This publication also discusses the sources of taxable income and types of evidence to consider when determining whether to record a valuation allowance.
