Accounting for Deferred Income Taxes, 2nd Edition

Chapter 5Reporting and Disclosure Under FASB ASC 740: Theory and Examples

Learning objectives

• Identify financial statement disclosures for deferred tax assets (DTAs) and deferred tax liabilities (DTLs) for both public and non-public companies.
• Recognize separately issued financial statements.
• Identify the components of income tax expense.

Financial statement disclosure

The components of the net DTL or DTA recognized in a company’s statement of financial position should be disclosed as follows:

• The total of all DTLs
• The total of all DTAs
• The total valuation allowance recognized for DTAs and the net change to the valuation allowance during the year
• The amounts and expiration dates of operating loss and tax credit carryforwards for tax purposes
• Any portion of the valuation allowance for DTAs for which subsequently recognized tax benefits will be allocated to reduce goodwill or other noncurrent intangible assets of an acquired company or directly to contributed capital
• The effect of enacted changes in tax laws or rates

Public company – A public company should disclose

• the approximate tax effect of each type of temporary difference and carryforward that gives rise to a significant portion of DTLs and DTAs (before any valuation allowance). This does not have to be separated into the tax effect on each tax jurisdiction;
• a public company that is not subject to income taxes because ...