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Chapter 12 — Other Investments and Special Situations

12.5 Regulated Entities

12.5 Regulated Entities

ASC 980-740
Income Taxes Applicable to Regulated Entities
25-1 For regulated entities that meet the criteria for application of paragraph 980-10-15-2, this Subtopic specifically:
  1. Prohibits net-of-tax accounting and reporting
  2. Requires recognition of a deferred tax liability for tax benefits that are flowed through to customers when temporary differences originate and for the equity component of the allowance for funds used during construction
  3. Requires adjustment of a deferred tax liability or asset for an enacted change in tax laws or rates.
25-2 If, as a result of an action by a regulator, it is probable that the future increase or decrease in taxes payable for (b) and (c) in the preceding paragraph will be recovered from or returned to customers through future rates, an asset or liability shall be recognized for that probable future revenue or reduction in future revenue pursuant to paragraphs 980-340-25-1 and 980-405-25-1. That asset or liability also shall be a temporary difference for which a deferred tax liability or asset shall be recognized.
25-3 Example 1 (see paragraph 980-740-55-8) illustrates recognition of an asset for the probable revenue to recover future income taxes.
25-4 Example 2 (see paragraph 980-740-55-13) illustrates adjustment of a deferred tax liability when the liability represents amounts already collected from customers.