Deloitte
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Chapter 4 — Uncertainty in Income Taxes

4.1 Overview and Scope

4.1 Overview and Scope

As discussed in Chapter 1, an entity’s overall objectives in the accounting for income taxes are to (1) “recognize the amount of taxes payable or refundable for the current year” and (2) “recognize deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an entity’s financial statements or tax returns.” The total tax provision includes current tax expense (benefit) (i.e., the amount of income taxes paid or payable [or refundable] for a year as determined by applying the provisions of the enacted tax law to the taxable income or the excess of deductions over revenues for that year) and deferred tax expense (or benefit) (i.e., change in DTAs and DTLs during the year). The total tax expense reported in the financial statements should reflect the income tax effects of tax positions on the basis of the two-step process in ASC 740-10, recognition (step 1) and measurement (step 2). The recognition and measurement requirements of ASC 740 should be applied only to uncertainties in income taxes and do not apply to non-income taxes such as sales tax, value-added tax, and payroll tax.