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Article 7561320992012

Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740 H. State and Local Income Taxes
#740 #ASC

H. State and Local Income Taxes Excerpt From Accounting Standards Codification Income Taxes—Overall Implementation Guidance and Illustrations 740–10–55–25 If deferred tax assets or liabilities for a state or local tax jurisdiction are significant, this Subtopic requires a separate deferred tax computation when there are significant differences between the tax laws of that and other tax jurisdictions that apply to the entity. In the United States, however, many state or local income taxes are based on US federal taxable income, and aggregate computations of deferred tax assets and liabilities for at least some of those state or local tax jurisdictions might be acceptable. In assessing whether an aggregate calculation is appropriate, matters such as differences in tax rates or the loss carryback and carryforward periods in those state or local tax jurisdictions should be considered. Also, the provisions of paragraph 740-10-4


Annotation 7561322302732

#740 #ASC

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.
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Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740 H. State and Local Income Taxes
income and as a result believes it is subject to ASC 740. b. Franchise Tax Effect on Deferred State Income Taxes — ASC 740 does not require specific accounting for deferred state income taxes. <span>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. After ASU 2019-12 is adopted, if a franchise tax (or similar tax) is partially based on income (for example, an entity pays the greater of an income-based tax and a non-income-based tax



Article 7561324662028

Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740, VI. Valuation Allowance
#ASC740 #SALT #Taxes

A. Evaluating if a valuation allowance is required ASC 740-10-30-2(b) states that the measurement of deferred tax assets is reduced, if necessary, by the amount of any tax benefits that, based on the evaluation of available evidence, are not expected to be realized. Determining whether a valuation allowance for deferred tax assets is necessary often requires an extensive analysis of positive and negative evidence regarding the realization of the deferred tax assets and, inherent in that, an assessment of the likelihood of sufficient future taxable income. This analysis typically includes determining the refund potential in the event of NOL carrybacks, scheduling reversals of temporary differences, evaluating potential tax-planning strategies and evaluating expectations of future profitability. A valuation allowance is recognized if, based on the weight of available evidence, it is more likely than not (likelihood of more than 50 percent) that some portion, or all, of the deferred tax asset will not b


Annotation 7561325972748

#ASC740 #SALT #Taxes
ASC 740 does not specifically define “cumulative losses in recent years.” However, in discussing cumulative losses, the FASB did note, in Statement 109.100 (non-authoritative), that the Board considered losses in the context of a three-year period. Although interpretations might vary, we believe a company is in a cumulative loss position for financial reporting purposes when it has a cumulative loss for the latest three years (see Basis for Conclusions of Statement 109 [non-authoritative]). This means that a company with a loss in the current year in excess of income realized in its previous two years would be in a cumulative loss position.
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Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740, VI. Valuation Allowance
idance in ASC 740-10-30-21 that forming a conclusion that a valuation allowance is not needed is difficult when there is significant negative evidence such as cumulative losses in recent years. <span>ASC 740 does not specifically define “cumulative losses in recent years.” However, in discussing cumulative losses, the FASB did note, in Statement 109.100 (non-authoritative), that the Board considered losses in the context of a three-year period. Although interpretations might vary, we believe a company is in a cumulative loss position for financial reporting purposes when it has a cumulative loss for the latest three years (see Basis for Conclusions of Statement 109 [non-authoritative]). This means that a company with a loss in the current year in excess of income realized in its previous two years would be in a cumulative loss position. We believe that, to measure cumulative losses for this purpose, a company should use book income and include pretax results from all sources except for the cumulative effect of changes



Flashcard 7561327545612

Tags
#ASC740 #SALT #Taxes
Question
The need for a valuation allowance is assessed by
Answer
[default - edit me]

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Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740, VI. Valuation Allowance
lable from the four sources of taxable income to determine the realizability of deferred tax assets and that overcoming negative evidence such as cumulative losses in recent years is difficult. <span>The need for a valuation allowance is assessed by tax component and by tax jurisdiction. That is, realization of a deferred tax asset depends on adequate taxable income in the carryback or carryforward period in the appropriate tax jur






Flashcard 7561328856332

Tags
#ASC740 #SALT #Taxes
Question
[default - edit me]
Answer
tax component and by tax jurisdiction.

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Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740, VI. Valuation Allowance
etermine the realizability of deferred tax assets and that overcoming negative evidence such as cumulative losses in recent years is difficult. The need for a valuation allowance is assessed by <span>tax component and by tax jurisdiction. That is, realization of a deferred tax asset depends on adequate taxable income in the carryback or carryforward period in the appropriate tax jurisdiction. As a result, positive and ne






Annotation 7561330429196

#ASC740 #SALT #Taxes
As noted in ASC 740-10-30-21, other negative evidence may exist and should be considered when determining the need for, and amount of, a valuation allowance. Although the types of other negative evidence are fairly straightforward, it should be noted that an absence of those other forms of negative evidence is not considered positive evidence as described in ASC 740-10-30-22. For example, if a company has not had net operating loss or tax credit carryforwards expire unused, it does not indicate positive evidence exists of a sufficient quality and quantity to obviate the need for a valuation allowance.
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Portfolio 5000-9th: Accounting for Income Taxes—FASB ASC 740, VI. Valuation Allowance
d with the other positive and negative evidence available from the four sources of taxable income before concluding on the realizability of the deferred tax assets. b. Other negative evidence — <span>As noted in ASC 740-10-30-21, other negative evidence may exist and should be considered when determining the need for, and amount of, a valuation allowance. Although the types of other negative evidence are fairly straightforward, it should be noted that an absence of those other forms of negative evidence is not considered positive evidence as described in ASC 740-10-30-22. For example, if a company has not had net operating loss or tax credit carryforwards expire unused, it does not indicate positive evidence exists of a sufficient quality and quantity to obviate the need for a valuation allowance. 1. Going-concern opinion — If an auditor modified its opinion to state a substantial doubt exists about an entity's ability to continue as a going concern, we believe, for all practical