What does ASC 740 stand for?
Accounting for income taxes
Accounting for income taxes (ASC 740) is a set of income tax standards requiring public companies to analyze and disclose income tax risks.
Who does ASC 740 apply to?
Who does ASC 740 apply to? The accounting for income taxes principles and requirements apply to domestic, foreign, public and private entities in the preparation of financial statements in accordance with U.S. GAAP. Non-profit organizations with activities that are subject to income taxes are also subject to ASC 740.
What is the method prescribed by ASC 740 to account for income taxes?
U.S. GAAP, specifically ASC Topic 740, Income Taxes, requires income taxes to be accounted for by the asset/liability method. The asset and liability method places emphasis on the valuation of current and deferred tax assets and liabilities.
What is ASC 740 FIN 48?
FIN 48 (mostly codified at ASC 740-10) is an official interpretation of United States accounting rules that requires businesses to analyze and disclose income tax risks. It was effective in 2007 for publicly traded entities, and is now effective for all entities adhering to US GAAP.
Why is 740 important?
ASC 740 mandates a balance sheet approach to accounting for income taxes. Companies recognize and measure deferred tax liabilities and deferred tax assets plus any required tax valuation allowances, then use the changes in these accounts to calculate the corporate deferred income tax provision.
Is ASC 740 the same as FIN 48?
ASC 740, formerly known as FIN 48, offers guidance on uncertain tax positions. It is broad in scope and now applies to both nonprofit and for-profit entities.
What are the four possible sources of taxable income according to ASC 740?
ASC 740 provides four possible sources of taxable income:
- Taxable income in prior carryback year(s) if carryback is permitted under the tax law.
- Future reversals of existing taxable temporary differences (i.e., deferred tax liabilities)
- Future taxable income exclusive of reversing temporary differences and carryforwards.
What does ASC 740 require?
ASC 740 requires the balance sheet to net all deferred tax assets and liabilities that can offset for tax purposes—usually meaning they relate to the same jurisdiction for the same entity. However, companies must disclose the total value of both deferred tax assets and liabilities.
Is a withholding tax an income tax for ASC 740?
2 Withholding taxes—entities that pay dividends. ASC 740-10-15-4 indicates that a withholding tax for the benefit of the recipients of a dividend is not an income tax of the entity that pays the dividend if certain conditions are met.
What is the scope of ASC 740?
What is the scope of ASC 740? ASC 740 establishes standards of financial accounting and reporting for currently payable income taxes as well as deferred income taxes payable at some point in the future.
Does ASC 740 apply to partnerships?
In the United States, general and limited partnerships (except certain “master limited partnerships” discussed below) are not subject to tax, because their earnings and losses are passed directly to their owners and taxed at that level. ASC 740 does not apply to such partnerships.
When did ASC 740 become effective?
740-10-55-140 In August 1991, a state amended its franchise tax statute to include a tax on income apportioned to the state based on the federal tax return. The new tax was effective January 1, 1992.