What is ASC Topic 740?
U.S. GAAP, specifically ASC Topic 740, Income Taxes, requires income taxes to be accounted for by the asset/liability method. This is the amount of income taxes payable or receivable for the current year as determined by applying the provisions of tax law to taxable income or loss for the year.
What are the objectives behind FASB ASC Topic 740?
ASC 740 provides a way to recognize a company’s income tax expense for financial reporting under U.S. generally accepted accounting principles (GAAP) by measuring the differences between the tax bases of assets and liabilities and the carrying amounts of assets and liabilities recognized for financial reporting.
When did ASC 740 become effective?
740-10-55-140 In August 1991, a state amended its franchise tax statute to include a tax on income apportioned to the state based on the federal tax return. The new tax was effective January 1, 1992.
What types of entities does ASC 740 apply to?
ASC 740 covers federal, foreign, state and local (including franchise) taxes based on income. Also covered are an enterprise’s domestic and foreign operations that are consolidated, combined, or accounted for by the equity method, and foreign enterprises that prepare financial statements in accordance with U.S. GAAP.
What is current tax liability?
Current Tax Liability means estimated or accrued tax liability amounts which are expected to be required to cover expenditures within the year for known tax obligations for tax consequences, net of any payments that have been made to or from Parent, that are recognized in the financial statements for that year in the …
Why is ASC 740 so important?
Accounting for income taxes (ASC 740) is a set of income tax standards requiring public companies to analyze and disclose income tax risks. Complying with ASC 740 is challenging for public companies due to the knowledge and experience needed to meet the significant tax and financial reporting requirements.
What is FIN 48 called now?
ASC 740, formerly known as FIN 48, offers guidance on uncertain tax positions. It is broad in scope and now applies to both nonprofit and for-profit entities. In our experience, most nonprofits argue that they are exempt from paying income taxes.
How is ETR calculated?
Calculating Effective Tax Rate Tax expense is usually the last line item before the bottom line—net income—on an income statement. For example, if a company earned $100,000 before taxes and paid $25,000 in taxes, then the effective tax rate is equal to 25,000 ÷ 100,000, or 0.25.
What is current tax?
Current tax is the amount of income taxes payable/recoverable in respect of the current profit/ loss for a period. Deferred Tax liability is the amount of income tax payable in future periods with respect to the taxable temporary differences.
What is tax due?
Tax due means all federal income taxes, alternative minimum taxes, environmental taxes, penalties, interest, and any other amount properly included as being due for the return in question net of all available credits and deductions. Tax Due may not be less than zero.
How does subtopic 740-10 apply to federal income tax?
It applies to any income tax in any jurisdiction, whether it is federal, state, local, or foreign income tax, and it applies to any entity that might be subject to income tax. Subtopic 740 – 10 offers a seemingly simple process:
What is the scope of FASB subtopic 740-10?
However, FASB did not intend for Subtopic 740 – 10 to have a significant effect on routine, day-to-day business tax transactions that would clearly meet the MLTN requirement and be fully allowed on audit. Thus, for example, the normal operating costs of a business would fall outside Subtopic 740 – 10’s scope.
Is there an advantage to using administrative practices to avoid subtopic 740-10?
Perhaps the biggest advantage to using administrative practices to avoid a Subtopic 740 – 10 unrecognized tax benefit arises in the state tax context. Obviously, a failure to file an income tax return with a state creates a potential tax liability.
What does ASC paragraph 740-10-25-13 say?
Observation: ASC Paragraph 740 – 10 – 25 – 13 states the “appropriate unit of account for determining what constitutes an individual tax position . . . is a matter of judgment based on the individual facts and circumstances of that position evaluated in light of all available evidence.”