Accounting for Deferred Income Taxes, 2nd Edition

Chapter 6FASB ASC 740-20: Intraperiod Tax Allocation

Learning objectives

• Identify the basics of intraperiod tax allocation.
• Recognize the five-step approach to intraperiod tax allocation.

Introduction

Interperiod Tax Allocations

Interperiod tax allocation involves the computation of deferred tax assets or deferred tax liabilities or both as a result of temporary differences that arise and reverse over two or more accounting

Intraperiod tax allocation involves

• dividing income tax expense or benefit or both within one accounting period between or among appropriate items on the income statement and balance sheet; and
• appropriate items that have individual tax consequences and are required to be reported net of tax in the financial statements. periods.

Income tax expense or benefit for the year shall be allocated among¹

• continuing operations,
• discontinued operations,
• extraordinary items,²
• other comprehensive income, and
• items charged or credited directly to shareholders’ equity.

Allocation to continuing operations

The amount allocated to continuing operations is the tax effect of the pre-tax income or loss from continuing operations that occurred during the year, plus or minus the tax effects of

• changes in the tax law or rates,
• changes in tax status,
• changes in circumstances that cause a change in judgment about the future realization of deferred tax assets, and
• tax ...