The guidance for the accounting of income taxes in ASC 740 requires recognition of a current tax asset or liability for the estimated taxes payable or refundable on tax returns for the current year and a deferred tax asset or liability for the estimated future tax effects attributable to temporary differences and carryforwards that are measured at the enacted tax rates.

Accordingly, under ASC 740 before the adoption of ASU 2019-12, deferred taxes are recognized for temporary differences that will reverse in future years for which annual taxable income is expected to exceed the capital-based tax computation based on the level of existing capital at year-end.