CCH Accounting for Income Taxes (2022)

Preface

About the Authors

SECTION I: INTERPRETATIONS OF TOPIC 740, INCOME TAXES

• Income Tax—Overall (740-10)
• Section 740-10-05: Overview and Background—General
• Section 740-10-10: Objectives—General
• Section 740-10-15: Scope and Scope Exceptions—General
• 740-10-15-2.A: Not-for-Profit Entities: Tax on Investment Income
• 740-10-15-2.B: Applicability of the Provisions in Subtopic 740-10 Related to Uncertain Tax Positions to Entities That Typically Are Not Taxpayers
• 740-10-15-3.A: Mexican Profit-Sharing Arrangements
• 740-10-15-3.B: Michigan Business Tax
• 740-10-15-3.C: Accounting for Investments in Affordable Housing Projects
• 740-10-15-3.D: Mexican Flat Tax
• 740-10-15-4.A: Taxes Assessed on Dividends
• 740-10-15-4.B: Texas State Franchise Tax
• 740-10-15-4.C: Attribution of Income Taxes to the Entity or Its Owners
• Section 740-10-20: Glossary
• Section 740-10-25: Recognition—General
• (Exceptions to the Basic Requirements)
• 740-10-25-3.A: Safe Harbor Leases
• 740-10-25-3.B: Identified Intangible Assets That Are Not Amortizable for Tax Purposes
• 740-10-25-3.C: Computation of Deferred Taxes Related to Identified Intangible Assets That Are Not Amortizable for Tax Purposes
• 740-10-25-3.D: Reorganization Value in Excess of Amounts Allocable to Identified Assets
• 740-10-25-3.E: Applicability of Paragraph 740-10-25-3(f) to U.S. GAAP Financial Statements of Non-U.S. Entities, Including Financial Statements of Non-U.S. Entities Operating in Highly Inflationary Economies
• 740-10-25-3.F: Nonmonetary Assets and Liabilities of Foreign Operations for Which the Local Currency Is Not the Functional Currency
• 740-10-25-3.G: Inflationary Profits Tax in Countries with Hyperinflation
• 740-10-25-3.H: Effect of a Change in an Important Assumption on the Accounting for Leveraged Leases
• 740-10-25-3.I: Distinguishing Foreign From Domestic Subsidiaries
• 740-10-25-3.J: Temporary Differences Related to CTA
• 740-10-25-3.K: Deferred Tax Accounting for "Outside Basis Differences" When a Change From Consolidation to Equity or Cost Method of Accounting Occurs
• 740-10-25-3.L: Subtopic 740-30 Exception Related to the Tax Bad Debt Reserve of a Savings and Loan Association
• 740-10-25-3.M: Scope of Subtopic 740-30 Exception Related to Investments in Foreign Subsidiaries
• 740-10-25-3.N: Monetary Restatement of Fixed Assets in Italy
• 740-10-25-3.O: Recognition of a Deferred Tax Liability for a Portion of an Outside Basis Difference
• 740-10-25-3.P: Dividends Received Deduction on the Repatriation of Certain Foreign Earnings Allowed by the 2004 Tax Act
• (Recognition Threshold for Uncertain Tax Positions)
• 740-10-25-3.Q: Intercompany Transfers of Intellectual Property
• 740-10-25-6.B: Treatment of Subsequent Events at Transition to the Provisions of Subtopic 740-10 Related to Uncertain Tax Positions
• 740-10-25-7.A: Administrative Practices and Precedents
• 740-10-25-10.A: Effectively Settled through Examination, Negotiation, or Litigation
• 740-10-25-13.A: Unit of Account
• 740-10-25-14.A: Consideration of Subsequent Events Differs From Topic 450, Contingencies
• 740-10-25-17.A: Interaction Between Net Operating Loss Carryforwards and Liabilities for Unrecognized Tax Benefits
• (Temporary Differences)
• 740-10-25-23.A: Accounting for Temporary Differences in Monetary Assets and Liabilities Caused by Changes in Currency Exchange Rates When an Entity's Functional Currency Is Different From Its Local (Tax Reporting) Currency
• 740-10-25-23.B: Identifying Temporary Differences in Tax Systems That Exclude Significant Types of Income or Expense From the Computation of the Base Amount Subject to Tax
• 740-10-25-29.A: Accounting for Temporary Differences and Carryforwards Acquired Other Than in a Business Combination
• 740-10-25-30.A: Basis Differences of Regulated Investment Companies, Cooperatives, and Similar Entities
• 740-10-25-30.B: Determining If a Basis Difference Is a Taxable Temporary Difference
• 740-10-25-30.C: Accounting for the Effects of Temporary Differences During a Tax Holiday
• 740-10-25-30.D: Accounting for the Tax Consequences of the Medicare Prescription Drug, Improvement and Modernization Act of 2003
• 740-10-25-30.E: Corporate Owned Life Insurance
• 740-10-25-30.F: Timing of Recognition of Conversion to a REIT
• (Changes in Tax Status)
• 740-10-25-32.A: Common Control Merger of Taxable and Nontaxable Entities
• (Investment Tax Credits)
• 740-10-25-46.A: Distinguishing Investment Tax Credits From Government Grants
• (Interest and Penalties)
• 740-10-25-56.A: Capitalization of Interest
• 740-10-25-56.B: Ratio of Earnings to Fixed Charges
• 740-10-25-56.C: Interest Income Related to Income Tax Uncertainties
• Section 740-10-30: Initial Measurement—General
• (Uncertain Tax Positions)
• 740-10-30-3.A: Effect of Noncontrolling Interests in Subsidiary Tax Pass-Through Entities
• 740-10-30-7.A: Example of How to Measure the Tax Benefits to Be Recognized Under Subtopic 740-10740-10-30-7.B: All Income Tax Uncertainties Need to Be Accounted for Pursuant to Subtopic 740-10
• (Applicable Tax Rates)
• 740-10-30-8.A: Losses of a Foreign Branch
• 740-10-30-8.B: State Apportionment Factors
• 740-10-30-9.A: Percentage Depletion
• 740-10-30-9.B: Small Life Insurance Entities
• 740-10-30-9.C: Canadian Crown Royalties and Resource Allowance
• 740-10-30-9.D: Effect of Changes in the Estimated Graduated Tax Rate
• 740-10-30-9.E: Measuring Deferred Taxes When Different Tax Rates Are Applied to Distributed and Undistributed Earnings
• 740-10-30-9.F: Qualified Production Activities
• (Establishment of a Valuation Allowance)
• 740-10-30-17.A: Deferred Tax Assets Resulting From OPEB Liabilities
• 740-10-30-17.B: Temporary Differences Related to Mexican Inventories
• 740-10-30-17.C: Limitations on Future Events Anticipated When Assessing the Realizability of Deferred Tax Assets
• 740-10-30-17.D: Valuation Allowance: Recognizing Impairment of Deferred Tax Assets Compared With Impairment of Long-Lived Intangible Assets
• 740-10-30-18.A: Sources of Taxable Income
• 740-10-30-18.B: AMT Credit Carryforwards and Valuation Allowances
• 740-10-30-18.C: Consideration of Deferred Tax Liabilities Related to Investments in Leveraged Leases When Assessing the Need for a Valuation Allowance for Deferred Tax Assets
• 740-10-30-18.D: Consideration of "Held-to-Maturity" Securities When Assessing the Need for a Valuation Allowance for Deferred Tax Assets
• 740-10-30-18.E: RAP/GAAP Differences for Financial Institutions
• 740-10-30-18.F: Accounting for Deferred Tax Assets Related to Available-for-Sale Debt Securities
• 740-10-30-19.A: Changing the Timing or Character of Future Taxable Income
• 740-10-30-19.B: Using the Sale of Appreciated Operating Assets as a Tax-Planning Strategy
• 740-10-30-19.C: The Effect of Uncertainty on Tax-Planning Strategies
• 740-10-30-19.D: Income Statement Classification of Direct Costs of Executing a Tax Strategy
• 740-10-30-21.A: Definition of Cumulative Losses in Recent Years
• 740-10-30-21.B: Significance of Cumulative Losses in Recent Years
• 740-10-30-21.C: Other Examples of Negative Evidence
• 740-10-30-21.D: Going-Concern Report as Negative Evidence
• 740-10-30-22.A: Appreciation in Market Value of an Asset as Positive Evidence
• 740-10-30-22.B: Forecast of Future Income as Positive Evidence
• (Separate Financial Statements of a Component of a Consolidated Group)
• 740-10-30-27.A: Allocating Taxes Among Members of the Consolidated Group
• 740-10-30-27.B: Examples of Separate Return and Pro Rata Allocation Approaches 740-10-30-27.C: Valuation Allowances in Separate Entity Financial Statements
• 740-10-30-27.D: Change in Method of Intercorporate Tax Allocation
• 740-10-30-27.E: Subpart F Income
• 740-10-30-27.F: Tax Effects of Push Down of Debt in an Acquisition
• 740-10-30-27.G: Presenting Income Taxes in Carveout Financial Statements
• 740-10-30-27.H: Presenting Income Taxes in the Separate Financial Statements of a Single Member LLC
• Section 740-10-35: Subsequent Measurement—General
• Section 740-10-40: Derecognition—General
• Section 740-10-45: Other Presentation Matters—General
• (Statement of Financial Position Classification)
• 740-10-45-4.A: Classification of Deferred Taxes Related to LIFO Inventory
• 740-10-45-5.A: Effect of a Valuation Allowance on Financial Statement Classification
• 740-10-45-9.A: Current/Noncurrent Classification of Tax Carryforwards
• 740-10-45-9.B: Presentation of Deferred Taxes Related to Intercompany Profits
• 740-10-45-11.A: Determining the Current Portion of the Liability for Unrecognized Tax Benefits
• 740-10-45-11.B: Balance Sheet Classification of Long-Term Liabilities for Unrecognized Tax Benefits
• (Change in Tax Law or Rates)
• 740-10-45-15.A: Changes in Tax Law
• 740-10-45-15.B: Effect of Tax Law Change on Current Tax Provision
• 740-10-45-15.C: Calculation of the Effect of the Increase in Corporate Tax Rates
• 740-10-45-15.D: Effect of Tax Law Changes on Items Other Than Income From Continuing Operations in the Year of the Change
• 740-10-45-15.E: Computing the Effect of the Tax Law Change on Certain Business Combinations
• 740-10-45-15.F: Presentation of Effect of Tax Law Change in the Income Statement
• 740-10-45-15.G: Accounting for Rate Regulation Implication of a Tax Rate Change
• 740-10-45-15.H: Determining the Enactment Date in Tax Jurisdictions Outside of the United States
• (Income Statement Classification of Penalties and Interest)
• 740-10-45-25.A: Changing Accounting Policies for Penalties and Interest
• Section 740-10-50: Disclosure—General
• 740-10-50-2.A: Classification of Liabilities for Tax Contingencies
• 740-10-50-2.B: Level of Detail in Determining Deductible and Taxable Temporary Differences
• 740-10-50-2.C: Disclosure of Certain Significant Risks and Uncertainties
• 740-10-50-2.D: SEC Schedule of Valuation Allowances
• 740-10-50-2.E: Additional Disclosures for SEC Registrants
• 740-10-50-6.A: Level of Detail of Types of Temporary Differences
• 740-10-50-6.B: Disclosure of Carryforwards
• 740-10-50-6.C: Direct Financing or Sales-Type Lease Temporary Differences
• 740-10-50-9.A: Interest and Penalties
• 740-10-50-9.B: Disclosure of the Effect of the Change in Tax Rates on Deferred Tax Liabilities and Assets
• 740-10-50-9.C: Disclosures Related to Tax Benefits From Share-Based Payments
• 740-10-50-12.A: Effective Tax Rate Reconciliation: Change in Valuation Allowance
• 740-10-50-12.B: Effect of Noncontrolling Interests in Subsidiary Tax Pass-Through Entities on the Effective Tax Rate Reconciliation
• 740-10-50-14.A: Disclosure of Future Taxable Income Assumptions
• 740-10-50-14.B: Disclosures Related to Safe Harbor Leases
• 740-10-50-14.C: Disclosure of the Effect of a Change in Tax Law or Rates on Leveraged Leases
• 740-10-50-15.A: Amounts Included in the Tabular Rollforward
• 740-10-50-15.B: Effective Tax Rate Disclosure
• 740-10-50-15.C: Treatment of the Federal Tax Benefit From State Tax Expense
• 740-10-50-16.A: Disclosure of Public Partnership Basis Differences
• 740-10-50-17.A: Required Disclosures in Separate Entity Financial Statements
• Section 740-10-55: Implementation Guidance and Illustrations—General
• Section 740-10-60: Relationships—General
• Section 740-10-S20: Securities and Exchange Commission Sections—Glossary
• Section 740-10-S25: Securities and Exchange Commission Sections—Recognition
• Section 740-10-S50: Securities and Exchange Commission Sections—Disclosures
• Section 740-10-S55: Securities and Exchange Commission Sections—Implementation Guidance and Illustrations
• Section 740-10-S99: Securities and Exchange Commission Sections—SEC Materials
• Income Tax—Intraperiod Tax Allocation (740-20)
• Section 740-20-05: Overview and Background—General
• Section 740-20-15: Scope and Scope Exceptions—General
• Section 740-20-20: Glossary
• Section 740-20-45: Other Presentation Matters—General
• 740-20-45-3.A: Subsequent Recognition of Tax Benefits Existing at the Date of Emerging From Bankruptcy
• 740-20-45-3.B: Order of Recognition of Pre and Post Quasi-Reorganization Tax Benefits
• 740-20-45-3.C: Tax Effects of Gains and Losses Included in Comprehensive Income but Excluded From Net Income
• 740-20-45-3.D: Tax Effects of Gains and Losses Included in Comprehensive Income but Excluded From Net Income When There Is a Change in Tax Rates or Laws
• 740-20-45-3.E: Tax Benefit Substitution
• 740-20-45-8.A: Computation of the Incremental Effect of an Item Other Than Income From Continuing Operations
• 740-20-45-8.B: Exceptions to the General Rule That the Tax Effect of an Item Other Than Income From Continuing Operations Is Computed as the Incremental Tax Effect of That Item
• 740-20-45-8.C: Intraperiod Tax Allocation of Changes in Valuation Allowances
• 740-20-45-8.D: Valuation Allowance Required Due to Spinoff
• 740-20-45-8.E: Change in Tax Basis of Assets and Liabilities as a Result of a Spinoff
• 740-20-45-8.F: Adjustments of Prior Interim Period's Intraperiod Tax Allocation
• 740-20-45-8.G: Intraperiod Tax Allocation of Changes in Valuation Allowances Due to Net Unrealized Losses on Available-for-Sale Securities
• 740-20-45-8.H: Income Statement Presentation in the Consolidated Financial Statements of a Subsidiary's Deferred Tax Assets and Liabilities When That Subsidiary Is Sold
• 740-20-45-8.I: Intraperiod Tax Allocation of Income Tax Uncertainties
• 740-20-45-8.J: Allocation of Income Taxes to a Cumulative Effect of a Change in Accounting Reflected Directly to Beginning of the Period Retained Earnings
• 740-20-45-8.K: Accounting for the Income Tax Consequences of Transactions With Noncontrolling Interest Holders
• 740-20-45-11.A: Tax Effects of Stock Issuance to Acquire an Asset
• 740-20-45-11.B: Timing of Recognition of "Excess" Tax Benefits Related to Employee Share-Based Payments
• 740-20-45-11.C: Accounting for the Tax Effects of Employee Share-Based Payments Prior to Exercise
• 740-20-45-11.D: Effect on Diluted EPS Calculation of Excess Tax Benefits or Shortfalls of Tax Benefits From Stock Plans
• 740-20-45-11.E: Transactions Among (and With) Shareholders That Have Tax Effects for the Entity
• 740-20-45-11.F: Tax Effects of Debt With Detachable Warrants
• 740-20-45-11.G: Tax Effects of an Induced Conversion of Convertible Debt
• 740-20-45-11.H: Classification in the Statement of Cash Flows of the Income Tax Benefit Realized on Exercise of a Nonqualified Employee Share Option
• 740-20-45-11.I: Incentive Stock Options and Employee Stock Purchase Plans
• 740-20-45-11.J: Accounting for the Shortfall in Tax Benefits Associated With an Equity Award
• 740-20-45-11.K: Income Tax Consequences of Issuing Convertible Debt With a Beneficial Conversion Feature
• 740-20-45-11.L: Income Tax Benefits of Dividends on Share-Based Payment Awards
• Section 740-20-55: Implementation Guidance and Illustrations—General
• Section 740-20-60: Relationships—General
• Income Tax—Other Considerations or Special Areas (740-30)
• Section 740-30-05: Overview and Background—General
• Section 740-30-15: Scope and Scope Exceptions—General
• Section 740-30-20: Glossary
• Section 740-30-25: Recognition—General
• 740-30-25-5.A: Tax Effects of Investments in Partnerships
• 740-30-25-5.B: Measurement of Deferred Tax Liabilities and Assets Related to Investments in Equity Method Investees
• 740-30-25-7.A: Excess of Financial Reporting Basis Over Tax Basis (or Vice Versa) of Investments in Subsidiaries ("Outside" Basis Differences)
• 740-30-25-7.B: Accounting for Outside Basis Differences Caused by a Subsidiary's Inside Basis Differences
• 740-30-25-7.C: Deferred Tax Accounting on Inside Basis Differences of a Subsidiary in the Consolidated Financial Statements of the Parent
• 740-30-25-7.D: Deferred Tax Accounting for Investments in Entities Consolidated Pursuant to the Variables Interest Entities Subsections of Topic 810, Consolidation
• 740-30-25-8.A: Acquisition of Noncontrolling Interest of a Subsidiary at an Amount in Excess of Book Value
• 740-30-25-9.A: Foreseeable Future
• 740-30-25-9.B Recognition of Deferred Tax Assets for a Parent Entity's Excess Tax Basis in the Stock of a Subsidiary That Is Accounted for as a Discontinued Operation
• 740-30-25-9.C: Foreseeable Future and the Realization of Tax Benefits in One of Two Jurisdictions
• Section 740-30-45: Other Presentation Matters—General
• Section 740-30-50: Disclosure—General
• 740-30-50-2.A: Subtopic 740-30 Disclosure of Outside Basis Differences
• Income Tax—Interim Reporting (740-270)
• Section 740-270-05: Overview and Background—General
• Section 740-270-15: Scope and Scope Exceptions—General
• Section 740-270-20: Glossary
• Section 740-270-25: Recognition—General
• 740-270-25-7.A: Changes in Valuation Allowances During Interim Periods
• Section 740-270-30: Initial Measurement—General
• 740-270-30-4.A: Definition of Ordinary Income
• 740-270-30-6.A: Effect of Noncontrolling Interests in Subsidiary Tax Pass-Through Entities on the Estimated Annual Effective Tax Rate Used to Determine Income Tax Expense or Benefit in Interim Periods
• 740-270-30-6.B: Effect of the Purchase of a Noncontrolling Interest in Tax Pass-Through Subsidiary on the Estimated Annual Effective Tax Rate
• 740-270-30-6.C: Effect of a Business Combination on the Estimated Annual Effective Tax Rate
• 740-270-30-10.A: Items Excluded From the Estimated Annual Effective Tax Rate
• 740-270-30-18.A: Changes in a Valuation Allowance in Interim Periods Subsequent to a Quasi-Reorganization, or Fresh-Start Accounting
• 740-270-30-18.B: When to Use the Discrete Method to Recognize the Income Tax Effects of Ordinary Income
• Section 740-270-35: Subsequent Measurement—General
• Section 740-270-45: Other Presentation Matters—General
• Section 740-270-50: Disclosure—General
• Section 740-270-55: Implementation Guidance and Illustrations—General

SECTION II: FUTURE EXPECTATIONS AND PROJECTS

• Recent Developments

SECTION III: APPENDICES

• Appendix I: Interpretations of Income Tax-Related Paragraphs in Selected Other Topics
• Topic 805, Business Combinations
• Section 805-740-05: Overview and Background—General
• Section 805-740-15: Scope and Scope Exceptions—General
• Section 805-740-20: Glossary
• Section 805-740-25: Recognition—General
• 805-740-25-3.A: Reduction of Acquiring Entity's Valuation Allowance as a Result of a Business Combination
• 805-740-25-3.B: Step Acquisitions
• 805-740-25-3.C: Accounting for Preacquisition Income Tax Contingencies (and Contingencies Arising From the Acquisition)
• 805-740-25-3.D: Acquired Subtopic 740-30 Differences
• 805-740-25-3.E: Accounting for Differences Between the Financial Reporting and Tax Bases of Goodwill When Goodwill Is Amortizable for Tax Purposes
• 805-740-25-3.F: Accounting for the Tax Benefits of Share-Based Awards Issued in a Business Combination
• 805-740-25-3.G: Accounting for the Income Tax Consequences of Acquisition-Related Costs
• 805-740-25-3.H: Accounting for the Deferred Tax Consequences of Contingent Consideration Arrangements
• 805-740-25-3.I: Accounting for the Deferred Tax Consequences of Acquired Contingent Assets and Assumed Contingent Liabilities
• Section 805-740-30: Initial Measurement—General
• 805-740-30-3.A: Changes to the Acquiring Entity's Valuation Allowance During the Measurement Period
• Section 805-740-35: Subsequent Measurement—General
• Section 805-740-45: Other Presentation Matters—General
• 805-740-45-2.A: Subsequent Accounting for Effects of Changes in a Valuation Allowance Recognized as Part of the Opening Balance Sheet of an LBO Entity
• 805-740-45-2.B: Subsequent Recognition of Acquired Tax Benefits
• 805-740-45-4.A: Accounting for the Statute of Limitations Related to an Uncertain Tax Position Expiring During the Measurement Period
• Section 805-740-50: Disclosure—General
• Section 805-740-55: Implementation Guidance and Illustrations—General
• Topic 852, Reorganizations
• Section 852-740-45: Other Presentation Matters—General
• 852-740-45-3.A: Quasi-Reorganizations
• 805-740-45-3.B: Reduction in a Valuation Allowance Existing at the Time of a Quasi-Reorganization as the Result of a Business Combination
• Topic 980, Regulated Operations
• Section 980-740-25: Recognition—General
• 980-740-25-1.A: Accounting for the Tax Effects of the Equity Component of the Allowance for Funds Used During Construction
• 980-740-25-2.A: Accounting for Income Tax-Related Regulatory Assets
• Appendix II: Index of Accounting Literature Cited
• Appendix III: Sample Footnotes and Disclosures