# ASC 270-740-25: Interim Reporting — Income Taxes — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/270/740/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:906c54aea211c549def9f83e049b7167dcd8a9b0040b7961b2236f08a727ee59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/270/740/#25-recognition) SEC content: no #### General Recognition Approach ##### [270-740-25-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:eccb3c2c6b6d5eb88c981846944c18e42cc99f78b3dd5613a05bf7a14aad906f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses the issue of how and when [income tax expense (or benefit)](https://asc.understandingaccounting.org/glossary/i/#income-tax-expense-or-benefit "The sum of current tax expense (or benefit) and deferred tax expense (or benefit).") is recognized in interim periods and distinguishes between elements that are recognized through the use of an estimated annual effective tax rate applied to measures of year-to-date operating results, referred to as [ordinary income (or loss)](https://asc.understandingaccounting.org/glossary/o/#ordinary-income-or-loss "Ordinary income (or loss) refers to income (or loss) from continuing operations before income taxes (or benefits) excluding significant unusual or infrequently occurring items. Discontinued operations and cumulative effects of changes in accounting principles are also excluded from this term. The term is not used in the income tax context of ordinary income versus capital gain. The meaning of unusual or infrequently occurring items is consistent with their use in the definitions of the terms unusual nature and infrequency of occurrence."), and specific events that are discretely recognized as they occur. ##### [270-740-25-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:9cfe313e62d7828565b343c3125acc9b117f8be20506ae74077c9ea855f0f263 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The [tax (or benefit)](https://asc.understandingaccounting.org/glossary/t/#tax-or-benefit "Tax (or benefit) is the total income tax expense (or benefit), including the provision (or benefit) for income taxes both currently payable and deferred.") related to ordinary income (or loss) shall be computed at an estimated annual effective tax rate and the tax (or benefit) related to all other items shall be individually computed and recognized when the items occur. ##### [270-740-25-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:22031b9828aa4c75c4ad443f7ed4e5796bb86637382efcaae3bc86cfa0f9ac2e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity is unable to estimate a part of its ordinary income (or loss) or the related tax (or benefit) but is otherwise able to make a reliable estimate, the tax (or benefit) applicable to the item that cannot be estimated shall be reported in the interim period in which the item is reported. ##### [270-740-25-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:1c984caf6366de48138fc9f6cb1b4f3d6c7c372b9bcaf5f5886a0728ce6f3def Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax benefit of an operating loss carryforward from prior years shall be included in the effective tax rate computation if the tax benefit is expected to be realized as a result of ordinary income in the current year. Otherwise, the tax benefit shall be recognized in the manner described in paragraph [740-270-45-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-4) in each interim period to the extent that income in the period and for the year to date is available to offset the operating loss carryforward or, in the case of a change in judgment about realizability of the related [deferred tax asset](https://asc.understandingaccounting.org/glossary/d/#deferred-tax-asset "The deferred tax consequences attributable to deductible temporary differences and carryforwards. A deferred tax asset is measured using the applicable enacted tax rate and provisions of the enacted tax law. A deferred tax asset is reduced by a valuation allowance if, based on the weight of evidence available, it is more likely than not that some portion or all of a deferred tax asset will not be realized.") in future years, the effect shall be recognized in the interim period in which the change occurs. ##### [270-740-25-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:0044dc6ae7733ecc9cede3be9e53592cde67c5246640db5946e53a7448bf0a61 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effects of new tax legislation shall not be recognized prior to enactment. The tax effect of a change in tax laws or rates on taxes currently payable or refundable for the current year shall be reflected in the computation of the annual effective tax rate beginning in the first interim period that includes the enactment date of the new legislation. The effect of a change in tax laws or rates on a [deferred tax liability](https://asc.understandingaccounting.org/glossary/d/#deferred-tax-liability "The deferred tax consequences attributable to taxable temporary differences. A deferred tax liability is measured using the applicable enacted tax rate and provisions of the enacted tax law.") or asset shall not be apportioned among interim periods through an adjustment of the annual effective tax rate. ##### [270-740-25-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:073d9f4e5c7433a84797788973ed76ecf9469959af8b0acc836501c11efa2ba6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax effect of a change in tax laws or rates on taxes payable or refundable for a prior year shall be recognized as of the enactment date of the change as tax expense (benefit) for the current year. See Example 6 (paragraph [740-270-55-44](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-44)) for illustrations of accounting for changes caused by new tax legislation. ##### [270-740-25-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:66c98f9e9d5b720f99830fcc18f2b1d9b61176405bff58030f9b76cb954401bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of a change in the beginning-of-the-year balance of a [valuation allowance](https://asc.understandingaccounting.org/glossary/v/#valuation-allowance "The portion of a deferred tax asset for which it is more likely than not that a tax benefit will not be realized.") as a result of a change in judgment about the realizability of the related deferred tax asset in future years shall not be apportioned among interim periods through an adjustment of the effective tax rate but shall be recognized in the interim period in which the change occurs. #### Recognition of the Tax Benefit of a Loss in Interim Periods ##### [270-740-25-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:2247048954355ac33a42db95dae293c34540aaaaa890a1d08163930756a8f99d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance establishes requirements for considering whether the amount of income tax benefit recognized in an interim period shall be limited due to interim period losses. ##### [270-740-25-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:d187b231508003d63a2c1eeaba4d1b6b244b56049c62db4d3cfaa6e8ff281b9c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax effects of losses that arise in the early portion of a fiscal year shall be recognized only when the tax benefits are expected to be either: 1. a Realized during the year 2. b Recognizable as a deferred tax asset at the end of the year in accordance with the provisions of Subtopic 740-10. ##### [270-740-25-10](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:367f5dca96c49213bb02921348d3d85ea5b7d3d95fbc406134d12b1eaae79067 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An established seasonal pattern of loss in early interim periods offset by income in later interim periods shall constitute evidence that realization is more likely than not, unless other evidence indicates the established seasonal pattern will not prevail. ##### [270-740-25-11](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:820844e04598c26df26b83eade2280b057c1d3f1efc3408ec15e92cd14757ba8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax effects of losses incurred in early interim periods may be recognized in a later interim period of a fiscal year if their realization, although initially uncertain, later becomes more likely than not. When the tax effects of losses that arise in the early portions of a fiscal year are not recognized in that interim period, no tax provision shall be made for income that arises in later interim periods until the tax effects of the previous interim losses are utilized. ##### [270-740-25-12](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:af949db7247b4d2657df95478dee51293c1c44f7264a2ac329e8edbad0877358 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has a significant unusual or infrequently occurring loss or a loss from discontinued operations, the tax benefit of that loss shall be recognized in an interim period when the tax benefit of the loss is expected to be either: 1. a Realized during the year 2. b Recognizable as a deferred tax asset at the end of the year in accordance with the provisions of Subtopic 740-10. Realization would appear to be more likely than not if future [taxable income](https://asc.understandingaccounting.org/glossary/t/#taxable-income "The excess of taxable revenues over tax deductible expenses and exemptions for the year as defined by the governmental taxing authority.") from (ordinary) income during the current year is expected based on an established seasonal pattern of loss in early interim periods offset by income in later interim periods. The guidance in this paragraph also applies to a tax benefit resulting from an employee share-based payment award within the scope of Topic 718 on stock compensation when the deduction for the award for tax purposes is greater than the cumulative cost of the award recognized for financial reporting purposes. ##### [270-740-25-13](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:339793e300198a33f74efd97b0fe2e3e74b0ed693bfe32fd22f5a1bad2bfa46d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 3, Cases A and B (paragraphs [740-270-55-26 through 55-28](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-26) ) for example computations involving unusual or infrequently occurring losses. ##### [270-740-25-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:32.251Z to 2026-09-09T23:20:32.251Z Record version: sha256:12b41449017960ed602abe685ad19cf5f5e80dcebeb32dc03b7da63c692c9540 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If recognition of a deferred tax asset at the end of the fiscal year for all or a portion of the tax benefit of the loss depends on taxable income from the reversal of existing taxable temporary differences, see paragraphs [740-270-30-32 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-32) for guidance. If all or a part of the tax benefit is not realized and future realization is not more likely than not in the interim period of occurrence but becomes more likely than not in a subsequent interim period of the same fiscal year, the previously [unrecognized tax benefit](https://asc.understandingaccounting.org/glossary/u/#unrecognized-tax-benefit "The difference between a tax position taken or expected to be taken in a tax return and the benefit recognized and measured pursuant to Subtopic 740-10.") shall be reported that subsequent interim period in the same manner that it would have been reported if realization had been more likely than not in the interim period of occurrence, that is, as a tax benefit relating to continuing operations or discontinued operations. See Subtopic 740-20 for the requirements to allocate total income tax expense (or benefit).