ASC 740 Income Taxes

This Subtopic provides guidance for recognizing and measuring tax positions taken or expected to be taken in a tax return that directly or indirectly affect amounts reported in financial statements. This Subtopic also provides accounting guidance for the related income tax effects of individual tax positions that do not meet the recognition thresholds required in order for any part of the benefit of that tax position to be recognized in an entity’s financial statements. Under this Subtopic, a tax position is first evaluated for recognition based on its technical merits. Tax positions that meet a recognition criterion are then measured to determine an amount to recognize in the financial statements. That measurement incorporates information about potential settlements with taxing authorities.

This Subtopic addresses the process of intraperiod tax allocation that allocates total income tax expense or benefit of an entity for a period to different components of comprehensive income and shareholders’ equity. This includes allocating income tax expense or benefit for the year to:

1. Continuing operations
2. Discontinued operations
3. Extraordinary items
4. Other comprehensive income
5. Items charged or credited directly to shareholders’ equity.

This Subtopic provides guidance on the method for making those allocations of total income tax expense or benefit and provides several examples and illustrations.

This Subtopic provides the required accounting and disclosure guidance for certain of the specific limited exceptions identified in Subtopic 740-10 to the requirements to record deferred taxes on specific basis differences related to investments in subsidiaries and corporate joint ventures arising from undistributed earnings or other causes.

The accounting addressed in this Subtopic represents, in some situations, an exception to the otherwise required comprehensive recognition of deferred income taxes for temporary differences.

This Subtopic describes:

1. The general computation of interim period income taxes (see paragraphs 740-270-30-1 through 30-9)
2. The application of the general computation to specific situations (see paragraphs 740-270-30-22 through 30-28)
3. The interim period income taxes requirements applicable to significant unusual or infrequently occurring items, discontinued operations, and extraordinary items (see Section 740-270-45)
4. Special computations applicable to operations taxable in multiple jurisdictions (see paragraph 740-270-30-36)
5. Guidelines for reflecting the effects of new tax legislation in interim period income tax provisions (see paragraphs 740-270-25-5 through 25-6)
6. Disclosure requirements (see paragraph 740-270-50-1).