14.5 Public Entities Not Subject to Income Taxes
ASC 740-10
50-16 A public
entity that is not subject to income taxes because its income is
taxed directly to its owners shall disclose that fact and the
net difference between the tax bases and the reported amounts of
the entity’s assets and liabilities.
14.5.1 Tax Bases in Assets
The disclosure requirement described in ASC 740-10-50-16 above applies to any
public entity for which income is taxed directly to its owners, including
regulated investment companies (mutual funds), public partnerships, and
Subchapter S corporations with public debt.
The reference to “tax bases” in ASC 740-10-50-16 is meant to include the
partnership’s or other entity’s tax basis in its (net) assets. The FASB’s
rationale for this information is based on the belief that financial statement
users would benefit from knowing the approximate tax consequence in the event
the flow-through entity changes its tax status and becomes a taxable entity in
the future.