# ASC 270-740: Interim Reporting — Income Taxes Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/270/740/) 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): 2026-09-09T23:20:19.518Z to 2026-09-09T23:20:48.925Z Record version: sha256:3a890e226128a0778f1b78930453723b1ae3b38f24efe188968a60c87edef393 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740: Interim Reporting — Income Taxes ### Machine-generated study aids ```json { "summary": "This subtopic governs how income tax expense (or benefit) is computed and presented in interim financial statements. The core rule is a hybrid model: tax on \"ordinary income (or loss)\" is measured by applying a best-estimate annual effective tax rate to year-to-date ordinary income, while items excluded from that rate — significant unusual or infrequently occurring items, discontinued operations, changes in tax law or rates on deferred taxes, changes in beginning-of-year valuation allowances, and certain share-based payment tax effects — are computed individually and recognized discretely in the interim period in which they occur (740-270-25-2; 740-270-30-11 through 30-13). Recognition of interim tax benefits from losses is limited to amounts expected to be realized during the year or recognizable as a deferred tax asset at year-end (740-270-25-9).", "key_points": [ "Tax on ordinary income (loss) is computed at an estimated annual effective tax rate applied to year-to-date ordinary income, with the interim period amount equal to the year-to-date amount less amounts reported in prior interim periods; all other items are computed individually and recognized when they occur (740-270-25-2; 740-270-30-5; 740-270-35-4).", "The annual effective rate must be re-estimated at the end of each successive interim period and reflects anticipated credits, foreign rates, depletion, capital gains rates, tax planning, and any valuation allowance for originating deductible temporary differences (740-270-30-6 through 30-8; 740-270-35-3).", "Excluded from the estimated annual effective tax rate: effects of changes in judgment about beginning-of-year valuation allowances, effects of tax law/rate changes on deferred taxes and on prior-year taxes payable/refundable, significant unusual or infrequently occurring items reported separately, items reported net of tax, and share-based payment tax effects where the tax deduction differs from cumulative book compensation cost (740-270-30-11 through 30-13; 740-270-25-7).", "New tax legislation may not be recognized before enactment; its effect on current-year taxes payable is reflected in the annual effective rate beginning in the interim period that includes the enactment date, while its effect on deferred taxes (and on prior-year taxes) is recognized discretely as of the enactment date (740-270-25-5; 25-6).", "Tax benefits of losses arising early in the year are recognized only if expected to be realized during the year or recognizable as a year-end deferred tax asset; an established seasonal pattern of early losses offset by later income is evidence that realization is more likely than not, and unrecognized early-period benefits absorb later-period income before any tax is provided (740-270-25-9 through 25-11; 740-270-35-5).", "Four year-to-date/full-year income-loss combinations drive the computation, with the year-to-date benefit and the estimated annual benefit each capped by the limitations in 740-270-30-30 through 30-33, which permit reversal of existing taxable temporary differences as a source of realization (740-270-30-22 through 30-28; 30-32).", "For multiple jurisdictions, one overall estimated annual effective rate is used, except that a jurisdiction with an unrecognizable loss benefit, or one for which a reliable estimate cannot be made, is excluded and computed separately or discretely (740-270-30-36; 30-19), and significant variations in the customary relationship between tax expense and pretax income must be disclosed (740-270-50-1)." ], "categories": [ "Income taxes", "Financial statement presentation", "Recognition", "Disclosure" ], "audience_level": "advanced", "student_note": "Interim tax provisions are a favorite exam and practice trap: the split between the annual-effective-rate approach for ordinary income and discrete recognition for everything else drives most errors. The most common misunderstanding is thinking a tax law change or a change in a beginning-of-year valuation allowance gets spread through the annual rate — it does not; only the effect on current-year taxes payable enters the rate, and only from the interim period containing the enactment date.", "related_topics": [ "740-10", "740-20", "270-10", "205-20", "718", "250-10" ], "key_concepts": [ "estimated annual effective tax rate", "ordinary income or loss", "discrete items", "interim tax benefit limitation", "valuation allowance", "intraperiod tax allocation", "enactment date", "multiple jurisdictions" ] } ``` Source downloaded (UTC): 2026-09-09T23:20:19.518Z to 2026-09-09T23:20:19.518Z Record version: sha256:019a3a995150c6dff3b0427004f1164ae3e55d6febd6bcc45248a81667754b49 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-00: 00 Status [Read section](https://asc.understandingaccounting.org/asc/270/740/#00-status) SEC content: no ##### [270-740-00-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-00-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:19.518Z to 2026-09-09T23:20:19.518Z Record version: sha256:bc059976ced3632fc39a0eb1e09c4f5faccc3ef39ee28178dfdca4cffd2680c2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following table identifies the changes made to this Subtopic.
ParagraphActionAccounting Standards UpdateDate
Commencement Date of the Lease (Commencement Date)AddedAccounting Standards Update No. 2016-0202/25/2016
Component of an EntitySupersededAccounting Standards Update No. 2014-0804/10/2014
ContractAddedAccounting Standards Update No. 2016-0202/25/2016
Deferred Tax Expense (or Benefit)AmendedAccounting Standards Update No. 2015-0101/09/2015
Extraordinary ItemsSupersededAccounting Standards Update No. 2015-0101/09/2015
Infrequency of OccurrenceAddedAccounting Standards Update No. 2015-0101/09/2015
LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
LesseeAddedAccounting Standards Update No. 2016-0202/25/2016
LessorAddedAccounting Standards Update No. 2016-0202/25/2016
Leveraged LeaseAddedAccounting Standards Update No. 2016-0202/25/2016
Ordinary Income (or Loss)AmendedAccounting Standards Update No. 2015-0101/09/2015
Underlying AssetAddedAccounting Standards Update No. 2016-0202/25/2016
Unusual NatureAddedAccounting Standards Update No. 2015-0101/09/2015
740-270-05-4AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-25-5AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-25-12AmendedAccounting Standards Update No. 2016-0903/30/2016
740-270-25-12 through 25-14
AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-30-4AmendedAccounting Standards Update No. 2016-0903/30/2016
740-270-30-8AmendedAccounting Standards Update No. 2016-0903/30/2016
740-270-30-8AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-30-11AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-30-12AmendedAccounting Standards Update No. 2016-0903/30/2016
740-270-30-12AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-30-15AmendedAccounting Standards Update No. 2016-0202/25/2016
740-270-30-28AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-30-34AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-45-2 through 45-5
AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-45-7AmendedAccounting Standards Update No. 2014-0804/10/2014
740-270-45-8AmendedAccounting Standards Update No. 2014-0804/10/2014
740-270-55-16AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-55-24 through 55-28
AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-55-38AmendedAccounting Standards Update No. 2015-0101/09/2015
740-270-55-44AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-55-45AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-55-49AmendedAccounting Standards Update No. 2019-1212/18/2019
740-270-55-50SupersededAccounting Standards Update No. 2019-1212/18/2019
740-270-55-51SupersededAccounting Standards Update No. 2019-1212/18/2019
740-270-55-52AmendedAccounting Standards Update No. 2015-0101/09/2015
Source downloaded (UTC): 2026-09-09T23:20:22.469Z to 2026-09-09T23:20:22.469Z Record version: sha256:38d2119f01b2f4da12d1e6caebb3ac0a01a1d22b66eb8d9b3aa13833253b2cc2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-05: 05 Overview and Background [Read section](https://asc.understandingaccounting.org/asc/270/740/#05-overview-and-background) SEC content: no ##### [270-740-05-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-05-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:22.469Z to 2026-09-09T23:20:22.469Z Record version: sha256:32f47dbd3be9f22f70ab771c594957d1e0d95ccbabdd960a70687dac1dbd687c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic addresses the accounting and disclosure for [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") in interim periods. The accounting requirements established in this Subtopic build upon the general requirements for accounting for income taxes established in Subtopic 740-10 as well as the intraperiod tax allocation process established in Subtopic 740-20. ##### [270-740-05-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-05-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:22.469Z to 2026-09-09T23:20:22.469Z Record version: sha256:e1ee7221949a80ba48761ba04937113c72f80a8d0e39cf83a33cebca3bce6bca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 740-10 addresses the computation of total tax expense for an entity. Subtopic 740-20 addresses the process of allocating total [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).") for a period to different components of comprehensive income and shareholders' equity. ##### [270-740-05-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-05-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:22.469Z to 2026-09-09T23:20:22.469Z Record version: sha256:3632ab5e29f4cdd329f2b18dba2b8b37edbb56cb3044407c50065c981686ad7b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Because an interim period is a subset of a longer period, typically a year, incremental requirements for recognition and measurement are established by this Subtopic. ##### [270-740-05-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-05-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:22.469Z to 2026-09-09T23:20:22.469Z Record version: sha256:f6d0bbed4fae25bbb76e23b5d56503d4e63b8a8f959d60d86cd435fd2ffdb157 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic describes: 1. a The general computation of interim period income taxes (see paragraphs [740-270-30-1 through 30-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-1) ) 2. b The application of the general computation to specific situations (see paragraphs [740-270-30-22 through 30-28](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-22) ) 3. c The interim period income taxes requirements applicable to significant unusual or infrequently occurring items and discontinued operations (see Section 740-270-45) 4. d Special computations applicable to operations taxable in multiple jurisdictions (see paragraph [740-270-30-36](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-36)) 5. e Guidelines for reflecting the effects of new tax legislation in interim period income tax provisions (see paragraphs [740-270-25-5 through 25-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-5) ) 6. f Disclosure requirements (see paragraph [740-270-50-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-50-1)). This Subtopic also provides Examples and illustrations in Section 740-270-55. Source downloaded (UTC): 2026-09-09T23:20:26.477Z to 2026-09-09T23:20:26.477Z Record version: sha256:216c3906b7f43ed1d7f90c3c18ea49749a060f44eebd5f9ed1357735ca5f074f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-15: 15 Scope and Scope Exceptions [Read section](https://asc.understandingaccounting.org/asc/270/740/#15-scope-and-scope-exceptions) SEC content: no #### Overall Guidance ##### [270-740-15-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-15-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:26.477Z to 2026-09-09T23:20:26.477Z Record version: sha256:e033476353ea8c5fb8beb8be8405652c0992700f88acf6ac04894d5232d83a96 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Subtopic 740-10-15. 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). Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:42619c8857a64a7dbe8e221cab5bbf2c1dc4638ff9564192bf54e694341568fb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-30: 30 Initial Measurement [Read section](https://asc.understandingaccounting.org/asc/270/740/#30-initial-measurement) SEC content: no #### General Methodology and Use of Estimated Annual Effective Tax Rate ##### [270-740-30-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:e6de126c2a3e3a1a1ee0274dd25d7a3690baf2b314ee7e5939a868777ea76957 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance establishes the methodology, including the use of an estimated annual effective tax rate, to determine [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).") in interim financial information. ##### [270-740-30-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:a8042ccb5ae77d02b4f0397481dba052953765fd3cd34d687e493ee6a819e46b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In reporting interim financial information, income tax provisions shall be determined under the general requirements for accounting for [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") set forth in Subtopic 740-10. ##### [270-740-30-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:65c5de2faa0ee47eb33c67ebbbb74973713b6adebd50df29a00c0060fd21d319 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Income tax expense (or benefit) for an interim period is based on income taxes computed for ordinary income or loss and income taxes computed for items or events that are not part of ordinary income or loss. ##### [270-740-30-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:ce7c2efc96c1cdfc989054d585f37af8c0bc5405268443321b014367ad40852b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-270-25-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-2) requires that 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)](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.") be computed at an estimated annual effective tax rate and the tax (or benefit) related to all other items be individually computed and recognized when the items occur (for example, the tax effects resulting from an employee share-based payment award within the scope of Topic 718 when the deduction for the award for tax purposes does not equal the cumulative compensation costs of the award recognized for financial reporting purposes). ##### [270-740-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:cacf113c4d47210574d278bb9af3ef34065330ddfb821536a072baf201c51941 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated annual effective tax rate, described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) , shall be applied to the year-to-date ordinary income (or loss) at the end of each interim period to compute the year-to-date tax (or benefit) applicable to ordinary income (or loss). ##### [270-740-30-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:c4ae0aa176d717a68751e1a9df86143b282126e840eecbef5100c0735575c091 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. At the end of each interim period the entity shall make its best estimate of the effective tax rate expected to be applicable for the full fiscal year. In some cases, the estimated annual effective tax rate will be the statutory rate modified as may be appropriate in particular circumstances. In other cases, the rate will be the entity's estimate of the tax (or benefit) that will be provided for the fiscal year, stated as a percentage of its estimated ordinary income (or loss) for the fiscal year (see paragraphs [740-270-30-30 through 30-34](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) if an ordinary loss is anticipated for the fiscal year). ##### [270-740-30-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:140f3d85fe14f8e7d4243835313bfd7baa30ee3bc7b4c1f6915f65a07af5fbbc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax effect 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.") expected to be necessary for a [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.") at the end of the year for originating deductible temporary differences and [carryforwards](https://asc.understandingaccounting.org/glossary/c/#carryforwards "Deductions or credits that cannot be utilized on the tax return during a year that may be carried forward to reduce taxable income or taxes payable in a future year. An operating loss carryforward is an excess of tax deductions over gross income in a year; a tax credit carryforward is the amount by which tax credits available for utilization exceed statutory limitations. Different tax jurisdictions have different rules about whether excess deductions or credits may be carried forward and the length of the carryforward period. The terms carryforward, operating loss carryforward, and tax credit carryforward refer to the amounts of those items, if any, reported in the tax return for the current year.") during the year shall be included in the effective tax rate. ##### [270-740-30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:1a9e2097da505287e776cdf0229423bda5b808821f676e8d6460f6d2008819dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated effective tax rate also shall reflect anticipated investment tax credits, foreign tax rates, percentage depletion, capital gains rates, and other available tax planning alternatives. However, in arriving at this estimated effective tax rate, no effect shall be included for the tax related to an employee share-based payment award within the scope of Topic 718 when the deduction for the award for tax purposes does not equal the cumulative compensation costs of the award recognized for financial reporting purposes, significant unusual or infrequently occurring items that will be reported separately, or for items that will be reported net of their related tax effect in reports for the interim period or for the fiscal year. The rate so determined shall be used in providing for income taxes on a current year-to-date basis. ##### [270-740-30-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:d205fd74f37e6bf68725bad5cc962053bdf798f8519e3a65467bf6fecd9a20ef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Examples 1 through 2 (see paragraphs [740-270-55-2 through 55-23](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-2) ) contain illustrations of the computation of estimated annual effective tax rates beginning in paragraphs [740-270-55-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-3); [740-270-55-12](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-12); and [740-270-55-19 through 55-20](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-19) . #### Exclusion of Items from Estimated Annual Effective Tax Rate ##### [270-740-30-10](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:d8d5b93a224afc07905b37a14f2c019d71b1b86141b2722eba7e570b5902b220 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance identifies items that are always excluded from the determination of the estimated annual effective tax rate. This guidance also specifies the alternatives for including or excluding certain investment tax credits in the estimated annual effective tax rate. ##### [270-740-30-11](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:38eb3822e5495fd78d434c3358c72afe62087ac95227263af5b54929ee623bd9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effects of changes in judgment about beginning-of-year valuation allowances and effects of changes in tax laws or rates on deferred tax assets or liabilities and taxes payable or refundable for prior years (in the case of a retroactive change) shall be excluded from the estimated annual effective tax rate calculation. ##### [270-740-30-12](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:a6848aeb8d5f09245494a5c95d1e6c2a5ff6bec05b53eb49fa6b42e2d8f601cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Taxes related to an employee share-based payment award within the scope of Topic 718 when the deduction for the award for tax purposes does not equal the cumulative compensation costs of the award recognized for financial reporting purposes, significant unusual or infrequently occurring items that will be reported separately or items that will be reported net of their related tax effect shall be excluded from the estimated annual effective tax rate calculation. ##### [270-740-30-13](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:36b8b4ae9791fbf7ba960530185ac40cd67677f7fc03b0fefbcef854e9ddeb7c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As these items are excluded from the estimated annual effective tax rate, Section 740-270-25 requires that the related tax effect be recognized in the interim period in which they occur. See Example 3 (paragraph [740-270-55-24](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-24)) for illustrations of accounting for these items in the interim period which they occur. ##### [270-740-30-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:615b1cda0705b26d6b2a4e2109f412c0b4c46027376f99e4a9becbd1e098a20e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Certain investment tax credits may be excluded from the estimated annual effective tax rate. If an entity includes allowable investment tax credits as part of its provision for income taxes over the productive life of acquired property and not entirely in the year the property is placed in service, amortization of deferred investment tax credits need not be taken into account in estimating the annual effective tax rate; however, if the investment tax credits are taken into account in the estimated annual effective tax rate, the amount taken into account shall be the amount of amortization that is anticipated to be included in income in the current year (see paragraphs [740-10-25-46](https://asc.understandingaccounting.org/asc/740/10/#740-10-25-46) and [740-10-45-28](https://asc.understandingaccounting.org/asc/740/10/#740-10-45-28)). ##### [270-740-30-15](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:c865f82aa0cd4342a80d6c6fee74de42f95f9d94b31cfff3ea0c28723440d97f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Further, paragraphs [842-50-30-1](https://asc.understandingaccounting.org/asc/842/50/#842-50-30-1) and [842-50-35-3 through 35-4](https://asc.understandingaccounting.org/asc/842/50/#842-50-35-3) require that investment tax credits related to leases that are accounted for as [leveraged leases](https://asc.understandingaccounting.org/glossary/l/#leveraged-lease "From the perspective of a lessor, a lease that was classified as a leveraged lease in accordance with the leases guidance in effect before the effective date and for which the commencement date is before the effective date.") shall be deferred and accounted for as return on the net investment in the leveraged leases in the years in which the net investment is positive and explains that the use of the term _years_ is not intended to preclude application of the accounting described to shorter periods. If an entity accounts for investment tax credits related to leveraged leases in accordance with those paragraphs for interim periods, those investment tax credits shall not be taken into account in estimating the annual effective tax rate. #### Ability to Make Estimates ##### [270-740-30-16](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:158ee82ac325b638f5279419c5ac16c79bacf3fba51fd6d6fb1e35fff30de29d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses the consequences of an entity's inability to reliably estimate some or all of the information that is ordinarily required to determine the annual effective tax rate in interim financial information. ##### [270-740-30-17](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:33dddc7d99e02cf629073ff1b3e164e7063def4f69a922c609068e9863ba474e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-270-25-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-3) requires that 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 be reported in the interim period in which the item is reported. ##### [270-740-30-18](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:70e55b6b0391ac569984e71793c5d137ea5c1ffa78aa3087f742a75811619fa9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on evaluations of possible future events and transactions and may be subject to subsequent refinement or revision. If a reliable estimate cannot be made, the actual effective tax rate for the year to date may be the best estimate of the annual effective tax rate. ##### [270-740-30-19](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:619d209eeb86caa08ee3165ab41beb973a95c2128ed25a4d1c80d071361f70f7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of translating foreign currency financial statements may make it difficult to estimate an annual effective foreign currency tax rate in dollars. For example, in some cases depreciation is translated at historical exchange rates, whereas many transactions included in income are translated at current period average exchange rates. If depreciation is large in relation to earnings, a change in the estimated ordinary income that does not change the effective foreign currency tax rate can change the effective tax rate in the dollar financial statements. This result can occur with no change in exchange rates during the current year if there have been exchange rate changes in past years. If the entity is unable to estimate its annual effective tax rate in dollars or is otherwise unable to make a reliable estimate of its ordinary income (or loss) or of the related tax (or benefit) for the fiscal year in a jurisdiction, the tax (or benefit) applicable to ordinary income (or loss) in that jurisdiction shall be recognized in the interim period in which the ordinary income (or loss) is reported. #### Effect of Operating Losses ##### [270-740-30-20](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:88659b808ecc2004b560b74c8d4be2b581140f87e1e7facca0d2768bf1a01e78 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses changes to the general methodology to determine income tax expense (or benefit) in interim financial information as set forth in paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5) when an entity has experienced or expects to experience operating losses. ##### [270-740-30-21](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:a2b2d105cebed797de778c6c1504ea3bc9241f1af8f590de79f6a97e2fd65474 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An entity may have experienced year-to-date ordinary income (or loss) at the end of any interim period. These year-to-date actual results of either ordinary income (or loss) may differ from the results expected by the entity for either ordinary income (or loss) for the full fiscal year. This guidance identifies the required methodology for recording interim period income taxes for each of the four possible relationships of year-to-date ordinary income (or loss) and expected full fiscal year ordinary income (or loss).See Examples 1 through 2 (paragraphs [740-270-55-2 through 55-23](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-2) ) for example computations in these different situations. This guidance also establishes income tax benefit limitations when ordinary losses exist. ##### [270-740-30-22](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:439ece6de46eb008be7abdc6bcd3ff3906c064dded51bd6ae30559834ca4f0d2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has ordinary income for the year to date at the end of an interim period and anticipates ordinary income for the fiscal year, the interim period tax shall be computed in accordance with paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5). ##### [270-740-30-23](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:1ff387632ae49c22b8be3729927c0a416be58b1383211affba19fdb2b253cc8a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1, Cases A and B1 (paragraphs [740-270-55-4 through 55-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4) ) for illustrations of the application of these requirements. ##### [270-740-30-24](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:f68709f589209978a006199d2b41ca7d4bae55c62982dea0d8d2e90b6210dfe1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has an ordinary loss for the year to date at the end of an interim period and anticipates ordinary income for the fiscal year, the interim period tax benefit shall be computed in accordance with paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5), except that the year-to-date tax benefit recognized shall be limited to the amount determined in accordance with paragraphs [740-270-30-30 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) . ##### [270-740-30-25](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:4b4d1b8940836b2c855611e5414a67cbb4cc227fe995d105fb9c6fa8dcb02b1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1, Cases B2 and B3 (paragraphs [740-270-55-7 through 55-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-7) ) for illustrations of the application of these requirements. ##### [270-740-30-26](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:8e4ed29095b5f87ab2cfdb96a2658ed19593793747344fb9b76da4a224a2b5b8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has ordinary income for the year to date at the end of an interim period and anticipates an ordinary loss for the fiscal year, the interim period tax shall be computed in accordance with paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5). The estimated tax benefit for the fiscal year, used to determine the estimated annual effective tax rate described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) , shall not exceed the tax benefit determined in accordance with paragraphs [740-270-30-30 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) . ##### [270-740-30-27](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:c758163c5627f578974285807da35c09ff2460d2822e7a16d6b3abe8b2a78600 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 2, Cases A2 and C2 (paragraphs [740-270-55-16](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-16) and [740-270-55-20](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-20)) for illustrations of the application of these requirements. ##### [270-740-30-28](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:09bed0acfaf4b5e845eb57de8b0af75cc23acc00b124aa82fead1e3e9839f5f5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity has an ordinary loss for the year to date at the end of an interim period and anticipates an ordinary loss for the fiscal year, the interim period tax benefit shall be computed in accordance with paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5). The estimated tax benefit for the fiscal year, used to determine the estimated annual effective tax rate described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) , shall not exceed the tax benefit determined in accordance with paragraphs [740-270-30-30 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) . ##### [270-740-30-29](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:0c843c3d0b778a21f9af2c10c3752f1a184e7ec3989f5e4c18c7c4d556154635 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 2, Cases A1, B, and C1 (paragraphs [740-270-55-15](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-15), [740-270-55-17](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-17), and [740-270-55-19](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-19)) for illustrations of the application of these requirements. #### Determining Income Tax Benefit Limitations ##### [270-740-30-30](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:d54bb1812a4ef5c0a1e7d4a9c8c9724f688d044e12855c5352961738170b4490 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-270-25-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-9) provides that a tax benefit shall be recognized for a loss that arises early in a fiscal year if the tax benefits are expected to be either of the following: 1. a Realized during the year 2. b Recognizable as a deferred tax asset at the end of the year in accordance with the requirements established in Subtopic 740-10. Paragraph [740-10-30-5(e)](https://asc.understandingaccounting.org/asc/740/10/#740-10-30-5) requires that a valuation allowance be recognized if it is more likely than not that the tax benefit of some portion or all of a deferred tax asset will not be realized. ##### [270-740-30-31](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:035bcc8005f8f3d7b64090d39bc6c53d47677502ce1d27dc92a0c37fee6a483b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The limitations described in the preceding paragraph shall be applied in determining the estimated tax benefit of an ordinary loss for the fiscal year, used to determine the estimated annual effective tax rate and the year-to-date tax benefit of a loss. ##### [270-740-30-32](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:e3a8f181649fa0527a23e01439b75f83c64a44c03f7d3a4c4c72b2f0c2c15593 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The reversal of existing taxable temporary differences may be a source of evidence in determining whether a tax benefit requires limitation. 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.") related to existing taxable temporary differences is a source of evidence for recognition of a tax benefit when all of the following conditions exist: 1. a An entity anticipates an ordinary loss for the fiscal year or has a year-to-date ordinary loss in excess of the anticipated ordinary loss for the fiscal year. 2. b The tax benefit of that loss is not expected to be realized during the year. 3. c Recognition of a deferred tax asset for that loss at the end of the fiscal year is expected to depend on [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 the reversal of existing taxable temporary differences (that is, a higher deferred tax asset valuation allowance would be necessary absent the existing taxable temporary differences). The requirement to consider the reversal of existing taxable temporary differences is illustrated in Example 2, Case D (see paragraph [740-270-55-21](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-21)). ##### [270-740-30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:89bdfd46893b0fd1f506eb7e897e93a33fbbfe3ba5b869fb8280fc4300acb8f3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If the tax benefit relates to an estimated ordinary loss for the fiscal year, it shall be considered in determining the estimated annual effective tax rate described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) . If the tax benefit relates to a year-to-date ordinary loss, it shall be considered in computing the maximum tax benefit that shall be recognized for the year to date. ##### [270-740-30-34](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:ec9e1f6f18c90191e36b76a9b1cf4e36ea05008c1e8e670930cbdccf6b78f414 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 2, Cases A1 and A2; B; and C1 and C2 (paragraphs [740-270-55-15 through 55-17](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-15) and [740-270-55-19 through 55-20](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-19) ) for illustrations of computations involving operating losses, and Example 1, Cases B2 and B3 (see paragraphs [740-270-55-7 through 55-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-7) ) for illustrations of special year-to-date limitation computations. #### Multiple Tax Jurisdictions ##### [270-740-30-35](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:c1a4dc0be118426c928a236e962c22871c79bc967b53425c4521189c05eb69c0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses possible changes to the general interim period income tax expense methodology when an entity is subject to tax in multiple jurisdictions. ##### [270-740-30-36](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:164827f68e64bd648fdcdc158a7457fcc82d37178b8f324ea6aa97296779fdfb Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If an entity that is subject to tax in multiple jurisdictions pays taxes based on identified income in one or more individual jurisdictions, interim period tax (or benefit) related to consolidated ordinary income (or loss) for the year to date shall be computed in accordance with the requirements of this Subtopic using one overall estimated annual effective tax rate with the following exceptions: 1. a If in a separate jurisdiction an entity anticipates an ordinary loss for the fiscal year or has an ordinary loss for the year to date for which, in accordance with paragraphs [740-270-30-30 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-30) , no tax benefit can be recognized, the entity shall exclude ordinary income (or loss) in that jurisdiction and the related tax (or benefit) from the overall computations of the estimated annual effective tax rate and interim period tax (or benefit). A separate estimated annual effective tax rate shall be computed for that jurisdiction and applied to ordinary income (or loss) in that jurisdiction in accordance with the methodology otherwise required by this Subtopic. 2. b If an entity is unable to estimate an annual effective tax rate in a foreign jurisdiction in dollars or is otherwise unable to make a reliable estimate of its ordinary income (or loss) or of the related tax (or benefit) for the fiscal year in a jurisdiction, the entity shall exclude ordinary income (or loss) in that jurisdiction and the related tax (or benefit) from the overall computations of the estimated annual effective tax rate and interim period tax (or benefit). The tax (or benefit) related to ordinary income (or loss) in that jurisdiction shall be recognized in the interim period in which the ordinary income (or loss) is reported. The tax (or benefit) related to ordinary income (or loss) in a jurisdiction may not be limited to tax (or benefit) in that jurisdiction. It might also include tax (or benefit) in another jurisdiction that results from providing taxes on unremitted earnings, foreign tax credits, and so forth. See Example 5, Cases A; B; and C (paragraphs [740-270-55-39 through 55-43](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-39) ) for illustrations of accounting for income taxes applicable to ordinary income if an entity is subject to tax in multiple jurisdictions. #### Accounting for Income Taxes Applicable to the Cumulative Effect of a Change in Accounting Principle ##### [270-740-30-37](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:21091b119c2f65f34e5639b31b23f399d05472f7cfeab7da19aac95e90249d31 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Topic 250 establishes the accounting requirements related to recording the effect of a change in accounting principle. The guidance in this Subtopic addresses issues related to the measurement of the tax effect in interim periods associated with those changes. ##### [270-740-30-38](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:8ea0d13815b1ba0d36d1189c0692bdb8e6783401aad7c113fe7c34228132da76 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The tax (or benefit) applicable to the cumulative effect of the change on retained earnings at the beginning of the fiscal year shall be computed the same as for the annual financial statements. ##### [270-740-30-39](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:34.642Z to 2026-09-09T23:20:34.642Z Record version: sha256:1c529f4cca21a714a6616fe267d4839aa7be1ba84c6680cce74c9256ea988777 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity makes an accounting change in other than the first interim period of the entity's fiscal year, paragraph [250-10-45-14](https://asc.understandingaccounting.org/asc/250/10/#250-10-45-14), requires that financial information for the prechange interim periods of the fiscal year shall be reported by retrospectively applying the newly adopted accounting principle to those prechange interim periods. The tax (or benefit) applicable to those prechange interim periods shall be recomputed. The revised tax (or benefit) shall reflect the year-to-date amounts and annual estimates originally used for the prechange interim periods, modified only for the effect of the change in accounting principle on those year-to-date and estimated annual amounts. Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:024ceefa0e6e88008d1004a6f82b118c5ba705f9fb76afe8d740b82a73ced628 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-35: 35 Subsequent Measurement [Read section](https://asc.understandingaccounting.org/asc/270/740/#35-subsequent-measurement) SEC content: no ##### [270-740-35-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:3ee687a1b0dc4e7ec44595b1a62c575448c5e6e8cc1817764504141d24e2ff97 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses the accounting for interim period [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).") in periods subsequent to an entity's first interim period within a fiscal year. See Section 740-270-30 for a description of and requirements related to the determination of the estimated annual effective tax rate. ##### [270-740-35-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:771e5411fbd99c7826d58f4e780e00c7ed85edcb81a1de285e9692aba76a7d53 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The estimated annual effective tax rate is described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) . As indicated in paragraph [740-270-30-18](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-18), estimates of the annual effective tax rate at the end of interim periods are, of necessity, based on evaluations of possible future events and transactions and may be subject to subsequent refinement or revision. If a reliable estimate cannot be made, the actual effective tax rate for the year to date may be the best estimate of the annual effective tax rate. ##### [270-740-35-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:2389069669ce4a083f849960db38b065604872f95db6dab9f49d15b83bf9e58a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [740-270-30-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6), at the end of each successive interim period the entity shall make its best estimate of the effective tax rate expected to be applicable for the full fiscal year. As indicated in paragraph [740-270-30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-8), the rate so determined shall be used in providing for [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") on a current year-to-date basis. The rate shall be revised, if necessary, as of the end of each successive interim period during the fiscal year to the entity's best current estimate of its annual effective tax rate. ##### [270-740-35-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:1d680863c76964423f136b6a9b73f63692c10d35ff317c5c752127e32263dff4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [740-270-30-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-5), the estimated annual effective tax rate shall be applied to the year-to-date [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.") at the end of each interim period to compute the year-to-date [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.") applicable to ordinary income (or loss). The interim period tax (or benefit) related to ordinary income (or loss) shall be the difference between the amount so computed and the amounts reported for previous interim periods of the fiscal year. ##### [270-740-35-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:e9fed81237aad430184d09c7a8926264291b664260ec36d807939571b5116555 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. One result of the year-to-date computation is that, if the tax benefit of an ordinary loss that occurs in the early portions of the fiscal year is not recognized because it is more likely than not that the tax benefit will not be realized, tax is not provided for subsequent ordinary income until the [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.") of the earlier ordinary loss is offset (see paragraphs [740-270-25-9 through 25-11](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-9) ). As indicated in paragraph [740-270-30-31](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-31), the limitations described in paragraph [740-270-25-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-9) shall be applied in determining the estimated tax benefit of an ordinary loss for the fiscal year, used to determine the estimated annual effective tax rate, and the year-to-date tax benefit of a loss. As indicated in paragraph [740-270-30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-33), if the tax benefit relates to an estimated ordinary loss for the fiscal year, it shall be considered in determining the estimated annual effective tax rate described in paragraphs [740-270-30-6 through 30-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-6) . If the tax benefit relates to a year-to-date ordinary loss, it shall be considered in computing the maximum tax benefit that shall be recognized for the year to date. ##### [270-740-35-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:46c412ea9a439b7c51135ee3d44579c954551ff25c18b5ebeb59918e3e639e25 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A change in judgment that results in subsequent recognition, derecognition, or change in measurement of a [tax position](https://asc.understandingaccounting.org/glossary/t/#tax-position "A position in a previously filed tax return or a position expected to be taken in a future tax return that is reflected in measuring current or deferred income tax assets and liabilities for interim or annual periods. A tax position can result in a permanent reduction of income taxes payable, a deferral of income taxes otherwise currently payable to future years, or a change in the expected realizability of deferred tax assets. The term tax position also encompasses, but is not limited to: A decision not to file a tax return An allocation or a shift of income between jurisdictions The characterization of income or a decision to exclude reporting taxable income in a tax return A decision to classify a transaction, entity, or other position in a tax return as tax exempt An entity's status, including its status as a pass-through entity or a tax-exempt not-for-profit entity.") taken in a prior interim period within the same fiscal year is an integral part of an annual period and, consequently, shall be reflected as such under the requirements of this Subtopic. This requirement differs from the requirement in paragraph [740-10-25-15](https://asc.understandingaccounting.org/asc/740/10/#740-10-25-15) applicable to a change in judgment that results in subsequent recognition, derecognition, or a change in measurement of a tax position taken in a prior annual period, which requires that the change (including any related interest and penalties) be recognized as a discrete item in the period in which the change occurs. ##### [270-740-35-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-35-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:37.242Z to 2026-09-09T23:20:37.242Z Record version: sha256:84c1ea43d4e987b6190565d18119b4397e0fd1d92b8a8cc66172566643cf9505 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. See Example 1, Case C (paragraph [740-270-55-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-9)) for an illustration of how changes in estimates impact quarterly income tax computations. Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:7387dbff71738c1c1c42d6d229e26b04e18a1eea9c97bde226aae629220f556f Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-45: 45 Other Presentation Matters [Read section](https://asc.understandingaccounting.org/asc/270/740/#45-other-presentation-matters) SEC content: no ##### [270-740-45-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:61ef78a8510b42912fc9b2c1e58066999aebef0635e7049612b23004139274cd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Subtopic 740-20 establishes requirements to allocate total [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).") of an entity for a period to different components of comprehensive income and shareholders' equity. That process is referred to as intraperiod tax allocation. This Section addresses that required allocation of income tax expense (or benefit) in interim periods. ##### [270-740-45-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:659344d37ac4dcb9d09898aedf12990d229521e77020065b523d205fbeb29349 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Section 740-20-45 describes the method of applying tax allocation within a period. The tax allocation computation shall be made using the estimated fiscal year ordinary income together with unusual items, infrequently occurring items, and discontinued operations for the year-to-date period. ##### [270-740-45-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:220e5068d7f436fc6a149a77fd122da400035e0e7b391ceea76378dff3bb1e0c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Discontinued operations that will be presented net of related tax effects in the financial statements for the fiscal year shall be presented net of related tax effects in interim financial statements. Unusual or infrequently occurring items that will be separately disclosed in the financial statements for the fiscal year shall be separately disclosed as a component of pretax income from continuing operations, and 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 those items shall be included in the tax (or benefit) related to continuing operations. See paragraphs [740-270-25-12 through 25-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-12) for interim period recognition guidance when an entity has a significant unusual or infrequently occurring loss or a loss from discontinued operations. See paragraphs [740-270-45-7 through 45-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-7) for the application of interim period allocation requirements to recognized income tax expense (or benefit) and discontinued operations. See Example 7 (paragraph [740-270-55-52](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-52)) for an illustration of the income statement display of these items. ##### [270-740-45-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:7c2d637c307f888109f7fbe0990f1b03dca27d6cc02d4dd1c6130a19f1d70763 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-20-45-3](https://asc.understandingaccounting.org/asc/740/20/#740-20-45-3) requires that the manner of reporting the tax benefit of an operating loss carryforward recognized in a subsequent year generally is determined by the source of the income in that year and not by the source of the operating loss carryforward or the source of expected future income that will result in realization of a [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.") for the operating loss carryforward. The tax benefit is allocated first to reduce tax expense from continuing operations to zero with any excess allocated to the other source(s) of income that provides the means of realization, for example, discontinued operations, other comprehensive income, and so forth. That requirement also pertains to reporting the tax benefit of an operating loss carryforward in interim periods. ##### [270-740-45-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:6752b90c27d17a5c7c04a3ad667950cca05013b98b8459202549e6b81ab3c567 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-270-25-11](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-11) establishes the requirement that 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. #### Specific Requirements Applicable to Discontinued Operations ##### [270-740-45-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:b5d8b0519700b10d68be75ffc0fdb2f131ebfc1b429e9ef00a3d78b40a3f8c5a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This guidance addresses specific requirements for the intraperiod allocation of [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") in interim periods when there are discontinued operations. ##### [270-740-45-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:a1e835aa76e3403a9a8877e5cf92728d3c7b903792cfb37101edb4249fab63e3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. When an entity reports discontinued operations, the computations described in paragraphs [740-270-25-12 through 25-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-12) , [740-270-30-11 through 30-13](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-11) , and [740-270-45-2 through 45-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-2) shall be the basis for the tax (or benefit) related to the income (or loss) from operations of the discontinued operation before the date on which the criteria in paragraph [205-20-45-1E](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-1E) are met. ##### [270-740-45-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:40.016Z to 2026-09-09T23:20:40.016Z Record version: sha256:8a02d4e1a10a4876b9b6399be2ef266503cd3f279cdb4bc8388992e94f007d2b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Income (or loss) from operations of the discontinued operation, prior to the interim period in which the date on which the criteria in paragraph [205-20-45-1E](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-1E) are met occurs, will have been included in [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.") of prior periods and thus will have been included in the estimated annual effective tax rate and tax (or benefit) calculations described in Sections 740-270-30 and 740-270-35 applicable to ordinary income. The total tax (or benefit) provided in the prior interim periods shall not be recomputed but shall be divided into two components, applicable to the remaining ordinary income (or loss) and to the income (or loss) from operations of the discontinued operation as follows. A revised estimated annual effective tax rate and resulting tax (or benefit) shall be computed, in accordance with Sections 740-270-30 and 740-270-35 applicable to ordinary income, for the remaining ordinary income (or loss), on the basis of the estimates applicable to such operations used in the original calculations for each prior interim period. The tax (or benefit) related to the operations of the discontinued operation shall be the total of: 1. a The difference between the tax (or benefit) originally computed for ordinary income (or loss) and the recomputed amount for the remaining ordinary income (or loss) 2. b The tax computed in accordance with paragraphs [740-270-25-12 through 25-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-12) ; [740-270-30-11 through 30-13](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-11) ; and [740-270-45-2 through 45-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-2) for any unusual or infrequently occurring items of the discontinued operation. See Example 4 (paragraph [740-270-55-29](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-29)) for an illustration of accounting for income taxes applicable to income (or loss) from discontinued operations at an interim date. Source downloaded (UTC): 2026-09-09T23:20:42.950Z to 2026-09-09T23:20:42.950Z Record version: sha256:0d812bc71a972b59340d7dfe0caa801024d5dac0f7dd1bccd8c582c49fd34eef Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-50: 50 Disclosure [Read section](https://asc.understandingaccounting.org/asc/270/740/#50-disclosure) SEC content: no #### Variations in Customary Income Tax Expense Relationships ##### [270-740-50-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-50-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:42.950Z to 2026-09-09T23:20:42.950Z Record version: sha256:8cbada44a1f2e64565b36ddc04a677c0a775bf12e521bef08001899f3a994c92 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Application of the requirements for accounting for [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") in interim periods may result in a significant variation in the customary relationship between income tax expense and pretax accounting income. The reasons for significant variations in the customary relationship between income tax expense and pretax accounting income shall be disclosed in the interim period financial statements if they are not otherwise apparent from the financial statements or from the nature of the entity's business. Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:4080864efab7f57e099160b8622fd5fb67619555615436c0c3479403d7212c4c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 270-740-55: 55 Implementation Guidance and Illustrations [Read section](https://asc.understandingaccounting.org/asc/270/740/#55-implementation-guidance-and-illustrations) SEC content: no ##### [270-740-55-1](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-1) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:26ba579cd8e276773b645f6cf1ffb5b4ecf1772245bbf84acf3e22605b7640ea Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section, which is an integral part of the requirements of this Subtopic, provides Examples of applying the required accounting for interim period [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") to some specific situations. In general, the Examples illustrate matters unique to accounting for income taxes at interim dates. The Examples do not include consideration of the nature of tax credits and events that do not have [tax consequences](https://asc.understandingaccounting.org/glossary/t/#tax-consequences "The effects on income taxes—current or deferred—of an event.") or illustrate all possible combinations of circumstances. #### Illustrations ##### [270-740-55-2](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-2) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:0b7863c72984e82defade13eed289eba5bae0934a313ad117aa4fdbae07a9dc5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in Sections 740-270-30 and 740-270-35 for accounting for income taxes applicable to [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.") at an interim date if ordinary income is anticipated for the fiscal year: 1. a Ordinary income in all interim periods (Case A) 2. b Ordinary income and losses in interim periods (Case B) 3. c Changes in estimates (Case C). ##### [270-740-55-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-3) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:09dc21ee49cabab29893d59fb3a0c1df65ffdc31f963ce23bbb16928799c5ccc Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A and B share all of the following assumptions: 1. a For the full fiscal year, an entity anticipates ordinary income of $100,000. All income is taxable in one jurisdiction at a 50 percent rate. Anticipated tax credits for the fiscal year total $10,000. No events that do not have tax consequences are anticipated. No changes in estimated ordinary income, tax rates, or tax credits occur during the year. 2. b Computation of the estimated annual effective tax rate applicable to ordinary income is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-036602B8-D812-4E7B-926E-65131BC39AB9-low.gif) "Tax at statutory rate ($100,000 at 50%)" " $50,000 " Less anticipated tax credits " (10,000)" Net tax to be provided " $40,000 " "Estimated annual effective tax rate ($40,000 ÷ $100,000)" 40% 3. c Tax credits are generally subject to limitations, usually based on the amount of tax payable before the credits. In computing the estimated annual effective tax rate, anticipated tax credits are limited to the amounts that are expected to be realized or are expected to be recognizable at the end of the current year in accordance with the provisions of Subtopic 740-10. If an entity is unable to estimate the amount of its tax credits for the year, see paragraphs [740-270-30-17 through 30-18](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-17) . ##### [270-740-55-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:c2503fb65f4feb11c3b42a331138ed2f3f00a171eac89502ab444118871a6dba Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income in all interim periods. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-7E672D80-5FB6-4173-A904-C1FAB7F65388-low.gif) Ordinary Income Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $20,000 " " $20,000 " 40% " $8,000 " $- " $8,000 " Second quarter " 20,000 " " 40,000 " 40% " 16,000 " " 8,000 " " 8,000 " Third quarter " 20,000 " " 60,000 " 40% " 24,000 " " 16,000 " " 8,000 " Fourth quarter " 40,000 " " 100,000 " 40% " 40,000 " " 24,000 " " 16,000 " Fiscal year " $100,000 " " $40,000 " ##### [270-740-55-5](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-5) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:55752622078799ed5cdadf0a4c04bd31a37b14d0e70b311868581dbfdc446884 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate ordinary income and losses in interim periods: 1. a Year-to-date ordinary income (Case B1) 2. b Year-to-date ordinary losses, realization more likely than not (Case B2) 3. c Year-to-date ordinary losses, realization not more likely than not (Case B3). ##### [270-740-55-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-6) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:a6741a11b9ce2aaa240b4144cd8c5b3289a751b4fc44e4380206aa8ecfe76ef9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income and losses in interim periods; there is not an ordinary loss for the fiscal year to date at the end of any interim period. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-6AF5D8AA-8089-4910-A4C4-C4A9103211A0-low.gif) Ordinary Income (Loss) Tax (or Benefit) Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $40,000 " " $40,000 " 40% " $16,000 " $- " $16,000 " Second quarter " 40,000 " " 80,000 " 40% " 32,000 " " 16,000 " " 16,000 " Third quarter " (20,000)" " 60,000 " 40% " 24,000 " " 32,000 " " (8,000)" Fourth quarter " 40,000 " " 100,000 " 40% " 40,000 " " 24,000 " " 16,000 " Fiscal year " $100,000 " " $40,000 " ##### [270-740-55-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-7) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:9cce92f2e8b578fc988dfcd27c34190b26e198482f0e8e9b2ced6271c5946fe8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income and losses in interim periods, and there is an ordinary loss for the year to date at the end of an interim period. Established seasonal patterns provide evidence that realization in the current year of the tax [benefit](https://asc.understandingaccounting.org/glossary/b/#benefit "See Tax (or Benefit).") of the year-to-date loss and of anticipated tax credits is more likely than not. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-F52226C7-3C47-45AB-B683-B8C95B1D397F-low.gif) Ordinary Income (Loss) Tax (or Benefit) Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $(20,000)" " $(20,000)" 40% " $(8,000)" $- " $(8,000)" Second quarter " 10,000 " " (10,000)" 40% " (4,000)" " (8,000)" " 4,000 " Third quarter " 15,000 " " 5,000 " 40% " 2,000 " " (4,000)" " 6,000 " Fourth quarter " 95,000 " " 100,000 " 40% " 40,000 " " 2,000 " " 38,000 " Fiscal year " $100,000 " " $40,000 " ##### [270-740-55-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-8) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:b24220303df18a958b578794ae7329d4810f1d2646e1d1dac3596922d2db9387 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income and losses in interim periods, and there is a year-to-date ordinary loss during the year. There is no established seasonal pattern and it is more likely than not that the tax benefit of the year-to-date loss and the anticipated tax credits will not be realized in the current or future years. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-9A3FBF9F-7E4D-467E-BF75-9CDF7A05737B-low.gif) Ordinary Income (Loss) Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $(20,000)" " $(20,000)" — (a) $- $- $- Second quarter " 10,000 " " (10,000)" — (a) - - - Third quarter " 15,000 " " 5,000 " 40% " 2,000 " - " 2,000 " Fourth quarter " 95,000 " " 100,000 " 40% " 40,000 " " 2,000 " " 38,000 " Fiscal year " $100,000 " " $40,000 " (a) No benefit is recognized because the tax benefit of the year-to-date loss is not expected to be realized during the current year or recognizable as a deferred tax asset at the end of the current year in accordance with the provisions of Subtopic 740-10. ##### [270-740-55-9](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-9) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:7e1afa743729b3ff0b7ca9295c208a06ce6df24bbece194525181005e6e4fbb6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. During the fiscal year, all of an entity's operations are taxable in one jurisdiction at a 50 percent rate. No events that do not have tax consequences are anticipated. Estimates of ordinary income for the year and of anticipated credits at the end of each interim period are as shown below. Changes in the estimated annual effective tax rate result from changes in the ratio of anticipated tax credits to tax computed at the statutory rate. Changes consist of an unanticipated strike that reduced income in the second quarter, an increase in the capital budget resulting in an increase in anticipated investment tax credit in the third quarter, and better than anticipated sales and income in the fourth quarter. The entity has ordinary income in all interim periods. Computations of the estimated annual effective tax rate based on the estimate made at the end of each quarter are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-D053B7CC-BFDC-4788-8DDC-00341DF79B3A-low.gif) \+ "Estimated, end of" First Quarter Second Quarter Third Quarter Actual Fiscal Year Estimated ordinary income for the fiscal year " $100,000 " " $80,000 " " $80,000 " " $100,000 " Tax at 50% statutory rate " $50,000 " " $40,000 " " $40,000 " " $50,000 " Less anticipated credits " (5,000)" " (5,000)" " (10,000)" " (10,000)" Net tax to be provided " $45,000 " " $35,000 " " $30,000 " " $40,000 " Estimated annual effective tax rate 45% 43.75% 37.5% 40% ##### [270-740-55-10](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-10) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:21decc2542f0144395669e038afd33401a34725c39f45d855b1eddccd7eb09b9 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-38D6E032-9E1E-4FED-9D2E-1F9D86E47F56-low.gif) Ordinary Income Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $25,000 " " $25,000 " 45% " $11,250 " $- " $11,250 " Second quarter " 5,000 " " 30,000 " 43.75% " 13,125 " " 11,250 " " 1,875 " Third quarter " 25,000 " " 55,000 " 37.5% " 20,625 " " 13,125 " " 7,500 " Fourth quarter " 45,000 " " 100,000 " 40% " 40,000 " " 20,625 " " 19,375 " Fiscal year " $100,000 " " $40,000 " ##### [270-740-55-11](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-11) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:c5d48e8855c7d08f34eae0b5ca9ab7c104e562454122f4c1da97157993315c43 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in Section 740-270-30 for accounting for income taxes applicable to ordinary income (or loss) at an interim date if an ordinary loss is anticipated for the fiscal year: 1. a Realization of the tax benefit of the loss is more likely than not (Case A) 2. b Realization of the tax benefit of the loss is not more likely than not (Case B) 3. c Partial realization of the tax benefit of the loss is more likely than not (Case C) 4. d Reversal of net deferred tax credits (Case D). ##### [270-740-55-12](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-12) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:9acf54fd9cbdd6d537373b8e870e45985d861062a08b571f06caa53c19df3de0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C share the following assumptions. 1. a For the full fiscal year, an entity anticipates an ordinary loss of $100,000. The entity operates entirely in one jurisdiction where the tax rate is 50 percent. Anticipated tax credits for the fiscal year total $10,000. No events that do not have tax consequences are anticipated. 2. b If there is a recognizable tax benefit for the loss and the tax credits pursuant to the requirements of Subtopic 740-10, computation of the estimated annual effective tax rate applicable to the ordinary loss would be as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-CE58B982-EAAB-4570-8008-7271AF50EC68-low.gif) "Tax benefit at statutory rate ($100,000 at 50%)" " $(50,000)" Tax credits " (10,000)" Net tax benefit " $(60,000)" "Estimated annual effective tax rate ($60,000 ÷ $100,000)" 60% ##### [270-740-55-13](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-13) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:67ebaf4fb393cb0341d1e7454924382691e648bdc4f1ac4fc191e43edee1ffe1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C state varying assumptions with respect to assurance of realization of the components of the net tax benefit. When the realization of a component of the benefit is not expected to be realized during the current year or recognizable as a [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.") at the end of the current year in accordance with the provisions of Subtopic 740-10, that component is not included in the computation of the estimated annual effective tax rate. ##### [270-740-55-14](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-14) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:0cfccc4f541eb695e8a666b4054fb0cc3f673315cff8ef9d0266539f60b650a8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate when realization of the tax benefit of the loss is more likely than not: 1. a Ordinary losses in all interim periods (Case A1) 2. b Ordinary income and losses in interim periods (Case A2). ##### [270-740-55-15](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-15) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:1dfc7bc97b070bb416ea71bb635de386f3b6da7dd6cfd29076c2c4db486ab2ae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary losses in all interim periods. The full tax benefit of the anticipated ordinary loss and the anticipated tax credits will be realized by carryback. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-12AF3B54-C130-4338-A2E7-752C9CCDD6DA-low.gif) Ordinary Loss Tax Benefit Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $(20,000)" " $(20,000)" 60% " $(12,000)" $- " $(12,000)" Second quarter " (20,000)" " (40,000)" 60% " (24,000)" " (12,000)" " (12,000)" Third quarter " (20,000)" " (60,000)" 60% " (36,000)" " (24,000)" " (12,000)" Fourth quarter " (40,000)" " (100,000)" 60% " (60,000)" " (36,000)" " (24,000)" Fiscal year " $(100,000)" " $(60,000)" ##### [270-740-55-16](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-16) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:7083ce29ed19afeb4d7500259123cb31e49686f96e755af078c71053eada3b0c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income and losses in interim periods and for the year to date. The full tax benefit of the anticipated ordinary loss and the anticipated tax credits will be realized by carryback. The full tax benefit of the maximum year-to-date ordinary loss can also be realized by carryback. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-027B04D1-BE4C-40AF-9ABA-64F63230C6F4-low.gif) Ordinary Income (Loss) Tax (or Benefit) Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $20,000 " " $20,000 " 60% " $12,000 " $- " $12,000 " Second quarter " (80,000)" " (60,000)" 60% " (36,000)" " 12,000 " " (48,000)" Third quarter " (80,000)" " (140,000)" 60% " (84,000)" " (36,000)" "(48,000)" Fourth quarter " 40,000 " " (100,000)" 60% " (60,000)" "(84,000)" "24,000" Fiscal year " $(100,000)" " $(60,000)" (a) Footnote superseded by Accounting Standards Update No. 2019-12. ##### [270-740-55-17](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-17) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:9ad4d68d9bf1989297e3d993572f2b9398773c995749f30d47fd2921bd8848bd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In Cases A1 and A2, if neither the tax benefit of the anticipated loss for the fiscal year nor anticipated tax credits were recognizable pursuant to Subtopic 740-10, the estimated annual effective tax rate for the year would be zero and no [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.") would be recognized in any quarter. That conclusion is not affected by changes in the mix of income and loss in interim periods during a fiscal year. However, see paragraph [740-270-30-18](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-18). ##### [270-740-55-18](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-18) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:ced6dad0a047552d8482812068dcb3f3b205d1317c3814c33a44b240b07fd768 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate when partial realization of the tax benefit of the loss is more likely than not: 1. a Ordinary losses in all interim periods (Case C1) 2. b Ordinary income and losses in interim periods (Case C2). ##### [270-740-55-19](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-19) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:a87103d5c980d995734cc7a4fa841d98056b11a032483d4919db18361aa339b3 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has an ordinary loss in all interim periods. It is more likely than not that the tax benefit of the loss in excess of $40,000 of prior income available to be offset by carryback ($20,000 of tax at the 50 percent statutory rate) will not be realized. Therefore the estimated annual effective tax rate is 20 percent ($20,000 benefit more likely than not to be realized divided by $100,000 estimated fiscal year ordinary loss). Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-A33EA674-3845-4B5A-A7F5-5C7234A452E2-low.gif) Ordinary Loss Tax Benefit Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $(20,000)" " $(20,000)" 20% " $(4,000)" $- " $(4,000)" Second quarter " (20,000)" " (40,000)" 20% " (8,000)" " (4,000)" " (4,000)" Third quarter " (20,000)" " (60,000)" 20% " (12,000)" " (8,000)" " (4,000)" Fourth quarter " (40,000)" " (100,000)" 20% " (20,000)" " (12,000)" " (8,000)" Fiscal year " $(100,000)" " $(20,000)" ##### [270-740-55-20](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-20) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:0e229ce9ae583f95a990036b0d457e4a4a4033aaadf26996fe58be9744123315 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity has ordinary income and losses in interim periods and for the year to date. It is more likely than not that the tax benefit of the anticipated ordinary loss in excess of $40,000 of prior income available to be offset by carryback ($20,000 of tax at the 50 percent statutory rate) will not be realized. Therefore the estimated annual effective tax rate is 20 percent ($20,000 benefit more likely than not to be realized divided by $100,000 estimated fiscal year ordinary loss), and the benefit that can be recognized for the year to date is limited to $20,000 (the benefit that is more likely than not to be realized). Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-01EFF2C5-6787-43DC-9069-9E9C9C955662-low.gif) Ordinary Income (Loss) Tax (or benefit) Year-to-Date Reporting Period Ordinary Income (Loss) Year-to-Date Estimated Annual Effective Tax Rate Computed Limited to Less Previously Provided Reporting Period First quarter " $20,000 " " $20,000 " 20% " $4,000 " $- " $4,000 " Second quarter " (80,000)" " (60,000)" 20% " (12,000)" " 4,000 " " (16,000)" Third quarter " (80,000)" " (140,000)" 20% " (28,000)" " $(20,000)" " (12,000)" " (8,000)" Fourth quarter " 40,000 " " (100,000)" 20% " (20,000)" " (20,000)" - Fiscal year " $(100,000)" " $(20,000)" ##### [270-740-55-21](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-21) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:7d34cad3c8c1011083231c5d9418448ea38bc68f1797d5f378d6f9bc532a5116 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The entity anticipates a fiscal year ordinary loss. The loss cannot be carried back, and future profits exclusive of reversing temporary differences are unlikely. Net deferred tax liabilities arising from existing net taxable temporary differences are present. A portion of the existing net taxable temporary differences relating to those liabilities will reverse within the loss carryforward period. Computation of the estimated annual effective tax rate to be used (see paragraphs [740-270-30-32 through 30-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-32) ) is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-71B113B1-9028-4A3E-89B8-9FBCD6BCD848-low.gif) Estimated fiscal year ordinary loss " $(100,000)" The tax benefit to be recognized is the lesser of: "Tax effect of the loss carryforward ($100,000 at 50% statutory rate)" " $50,000 " Amount of the net deferred tax liabilities that would otherwise have been settled during the carry-forward period " $24,000 " "Estimated annual effective tax rate ($24,000 ÷ $100,000)" 24% ##### [270-740-55-22](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-22) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:a699092fd92215caf7800bac9dae64619faba953c30bfa92dee6a29977339a41 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-1591EF53-178C-41C3-84CD-FF39B5E81802-low.gif) Ordinary Loss Tax Benefit Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $(20,000)" " $(20,000)" 24% " $(4,800)" $- " $(4,800)" Second quarter " (20,000)" " (40,000)" 24% " (9,600)" " (4,800)" " (4,800)" Third quarter " (20,000)" " (60,000)" 24% " (14,400)" " (9,600)" " (4,800)" Fourth quarter " (40,000)" " (100,000)" 24% " (24,000)" " (14,400)" " (9,600)" Fiscal year " $(100,000)" " $(24,000)" ##### [270-740-55-23](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-23) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:0faf3ddfb2d4a9e672f3da639464084723f7dfd52ad46c72f6ed63bda950cfe1 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Note that changes in the timing of the loss by quarter would not change this computation. ##### [270-740-55-24](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-24) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:75b81f235a1b25c33f841f579b34208af98e0db6f1e246f9a4a38e44ea011ddf Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate accounting for income taxes applicable to unusual or infrequently occurring items when ordinary income is expected for the fiscal year: 1. a Realization of the tax benefit is more likely than not at date of occurrence (Case A) 2. b Realization of the tax benefit not more likely than not at date of occurrence (Case B). ##### [270-740-55-25](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-25) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:1ec4d5c77fdd50afa77759892c886d87bf08d05dd55b697e8a8cf192f3d85847 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A and B illustrate the computation of the tax (or benefit) applicable to unusual or infrequently occurring items when ordinary income is anticipated for the fiscal year. These Cases are based on the assumptions and computations presented in paragraph [740-270-55-3](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-3) and Example 1, Cases A and B (see paragraphs [740-270-55-4 through 55-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4) ), plus additional information supplied in Cases A and B of this Example. The computation of the tax (or benefit) applicable to the ordinary income is not affected by the occurrence of an unusual or infrequently occurring item; therefore, each Case refers to one or more of the illustrations of that computation in Example 1, Cases A and B (see paragraphs [740-270-55-4 through 55-8](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4) ), and does not reproduce the computation and the assumptions. The income statement display for tax (or benefit) applicable to unusual or infrequently occurring items is illustrated in Example 7 (see paragraph [740-270-55-52](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-52)). ##### [270-740-55-26](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-26) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:5ccb6a0089b7b4273c914f5b0c2f597cb368f6f69343571276f89ea405ef39ce Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As explained in paragraph [740-270-55-25](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-25), this Case is based on the computations of tax applicable to ordinary income that are illustrated in Example 1, Case A (see paragraph [740-270-55-4](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4)). In addition, the entity experiences a tax-deductible unusual or infrequently occurring loss of $50,000 (tax benefit $25,000) in the second quarter. Because the loss can be carried back, it is more likely than not that the tax benefit will be realized at the time of occurrence. Quarterly tax provisions are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-07C65BB9-755E-4671-AB73-749BB45C8911-low.gif) Tax (or Benefit) Applicable to Reporting Period Ordinary Income "Unusual, Infrequently Occurring, or Extraordinary Loss" Ordinary Income "Unusual, Infrequently Occurring, or Extraordinary Loss" First quarter " $20,000 " " $8,000 " Second quarter " 20,000 " " $(50,000)" " 8,000 " " $(25,000)" Third quarter " 20,000 " " 8,000 " Fourth quarter " 40,000 " " 16,000 " Fiscal year " $100,000 " " $(50,000)" " $40,000 " " $(25,000)" ##### [270-740-55-27](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-27) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:8ccd0cc55db70de7edc21e2e8322d6436dc44e6526a8fae79f80d59643ba9167 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Note that changes in assumptions would not change the timing of the recognition of the tax benefit applicable to the unusual or infrequently occurring item as long as realization is more likely than not. ##### [270-740-55-28](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-28) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:0c0dad3c1218e6116bb207c4063e515fb803d6e6a4fafafccdfb074e7cdfb296 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As explained in paragraph [740-270-55-25](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-25), this Case is based on the computations of tax applicable to ordinary income that are illustrated in Example 1, Cases A and B1 (see paragraphs [740-270-55-4 through 55-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-4) ). In addition, the entity experiences a tax-deductible unusual or infrequently occurring loss of $50,000 (potential benefit $25,000) in the second quarter. The loss cannot be carried back, and available evidence indicates that 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.") is needed for all of the deferred tax asset. As a result, the tax benefit of the unusual or infrequently occurring loss is recognized only to the extent of offsetting ordinary income for the year to date. Quarterly tax provisions under two different assumptions for the occurrence of ordinary income are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-D1FC8685-0745-40A0-87E5-9E8C9EC29B7E-low.gif) Tax (or Benefit) Applicable to Assumptions and Reporting Period Ordinary Income (Loss) "Unusual, Infrequently Occurring, or Extraordinary Loss" Ordinary Income (Loss) "Unusual, Infrequently Occurring, or Extraordinary Loss" Reporting Period Year-to-Date Year-to-Date Less Previously Provided Reporting Period Income in all quarters: First quarter " $20,000 " " $8,000 " " $8,000 " Second quarter " 20,000 " " $(50,000)" " 8,000 " " 16,000 " " $(16,000)" $- " $(16,000)" Third quarter " 20,000 " " 8,000 " " 24,000 " " (24,000)" " (16,000)" " (8,000)" Fourth quarter " 40,000 " " 16,000 " " 40,000 " " (25,000)" " (24,000)" " (1,000)" Fiscal year " $100,000 " " $(50,000)" " $40,000 " " $(25,000)" Income and loss quarters: First quarter " $40,000 " " $16,000 " " $16,000 " Second quarter " 40,000 " " $(50,000)" " 16,000 " " 32,000 " " $(25,000)" $- " $(25,000)" Third quarter " (20,000)" " (8,000)" " 24,000 " " (24,000)" " (25,000)" " 1,000 " Fourth quarter " 40,000 " " 16,000 " " 40,000 " " (25,000)" " (24,000)" " (1,000)" Fiscal year " $100,000 " " $(50,000)" " $40,000 " " $(25,000)" ##### [270-740-55-29](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-29) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:ef35be00044ad6cfc2d0e350c9a0e7802d2d7b31c5a63a3d590810d48d0f393b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Example illustrates the guidance in paragraph [740-270-45-7](https://asc.understandingaccounting.org/asc/270/740/#270-740-45-7). An entity anticipates ordinary income for the year of $100,000 and tax credits of $10,000. The entity has ordinary income in all interim periods. The estimated annual effective tax rate is 40 percent, computed as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-05E317B0-19B8-4479-9881-139EB0571AAC-low.gif) Estimated pretax income " $100,000 " Tax at 50% statutory rate " $50,000 " Less anticipated credits " (10,000)" Net tax to be provided " $40,000 " Estimated annual effective tax rate 40% ##### [270-740-55-30](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-30) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:59cd8da04324e8befaefeef843dd5e9de53ac98c5550c9d88834e0474c70aea7 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly tax computations for the first two quarters are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-AF4FE422-1FF8-49F8-8528-F11C36451388-low.gif) Ordinary Income Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $20,000 " " $20,000 " 40% " $8,000 " $- " $8,000 " Second quarter " 25,000 " " 45,000 " 40% " 18,000 " " 8,000 " " 10,000 " ##### [270-740-55-31](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-31) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:f2ed048052fe4e032080319ecb996dd92296ba2da746eea9750b507ae0723756 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In the third quarter a decision is made to discontinue the operations of Division X, a segment of the business that has recently operated at a loss (before income taxes). The pretax income (and losses) of the continuing operations of the entity and of Division X through the third quarter and the estimated fourth quarter results are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-8D4ACFB2-5FBD-4B22-805E-90CF4014F730-low.gif) Division X Reporting Period Revised Ordinary Income from Continuing Operations Loss from Operations Provision for Loss on Disposal First quarter " $25,000 " " $(5,000)" Second quarter " 35,000 " " (10,000)" Third quarter " 50,000 " " (10,000)" " $(55,000)" Fourth quarter " 50,000 " (a) - - Fiscal year " $160,000 " " $(25,000)" " $(55,000)" (a) Estimated. ##### [270-740-55-32](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-32) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:4ba9c338fed7841dc3239fcea8ff8e3a5a73ec88a4337eb041a5c05fadf9a5d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. No changes have occurred in continuing operations that would affect the estimated annual effective tax rate. Anticipated annual tax credits of $10,000 included $2,000 of credits related to the operations of Division X. The revised estimated annual effective tax rate applicable to ordinary income from continuing operations is 45 percent, computed as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-234D9A59-20F3-415A-AA09-CEEBFBBE71DB-low.gif) Estimated ordinary income from continuing operations " $160,000 " Tax at 50% statutory rate " 80,000 " Less anticipated tax credits applicable to continuing operations " (8,000)" Net tax to be provided " $72,000 " Estimated annual effective tax rate 45% ##### [270-740-55-33](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-33) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:9bdd387ef44eefd97fa5d6ea57b780a2f837e22bb6a8d84d98b39ad1037e09f2 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly computations of tax applicable to ordinary income from continuing operations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-0EDAF8ED-5E7B-4980-A6F0-C9ECA6997EE4-low.gif) Ordinary Income Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $25,000 " " $25,000 " 45% " $11,250 " $- " $11,250 " Second quarter " 35,000 " " 60,000 " 45% " 27,000 " " 11,250 " " 15,750 " Third quarter " 50,000 " " 110,000 " 45% " 49,500 " " 27,000 " " 22,500 " Fourth quarter " 50,000 " " 160,000 " 45% " 72,000 " " 49,500 " " 22,500 " Fiscal year " $160,000 " " $72,000 " ##### [270-740-55-34](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-34) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:55a69255978ecd8fa559e5f0ebd500b882c51bef2d9fd79966d87d77d7274cbe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Tax benefit applicable to Division X for the first two quarters is computed as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-91167D60-1186-4971-84B6-0C048ABB6875-low.gif) Tax Applicable to Ordinary Income Previously Reported Recomputed (Above) Tax Benefit Applicable to Division X Reporting Period (A) (B) (A-B) First quarter " $8,000 " " $11,250 " " $(3,250)" Second quarter " 10,000 " " 15,750 " " (5,750)" " $(9,000)" ##### [270-740-55-35](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-35) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:2bd46e9f07a7f608c09128cba9248ea0c0e01f7f893f268068f4777fad634118 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The third quarter tax benefits applicable to both the loss from operations and the provision for loss on disposal of Division X are computed based on estimated annual income with and without the effects of the Division X losses. Current year tax credits related to the operations of Division X have not been recognized. It is assumed that the tax benefit of those credits will not be realized because of the discontinuance of Division X operations. Any reduction in tax benefits resulting from recapture of previously recognized tax credits resulting from discontinuance or current year tax credits applicable to the discontinued operations would be reflected in the tax benefit recognized for the loss on disposal or loss from operations as appropriate. If, because of capital gains and losses, and so forth, the individually computed tax effects of the items do not equal the aggregate tax effects of the items, the aggregate tax effects are allocated to the individual items in the same manner that they will be allocated in the annual financial statements. The computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-EB60B71A-D34F-4FAF-9BF4-8BBCF2B80E94-low.gif) Loss from Operations Division X Provision for Loss on Disposal Estimated annual income from continuing operations " $160,000 " " $160,000 " Loss from Division X operations " (25,000)" Provision for loss on disposal of Division X " (55,000)" Total " $135,000 " " $105,000 " Tax at 50% statutory rate " $67,500 " " $52,500 " Anticipated credits from continuing operations " (8,000)" " (8,000)" Tax credits of Division X and recapture of previously recognized tax credits resulting from discontinuance - - Taxes on income after effect of Division X losses " 59,500 " " 44,500 " Taxes on income before effect of Division X losses—see computation above " 72,000 " " 72,000 " Tax benefit applicable to the losses of Division X " (12,500)" " (27,500)" Amounts previously recognized—see computation above " (9,000)" - Tax benefit recognized in third quarter " $(3,500)" " $(27,500)" ##### [270-740-55-36](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-36) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:a5d378efecfe11086c8acd1eac346feabb4744011bc5d9683e760a9bede4c3dd Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The resulting revised quarterly tax provisions are summarized as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-A7C8405D-AD09-4D32-A4E6-E647676B87C9-low.gif) Pretax Income (Loss) Tax (or Benefit) Applicable to Reporting Period Continuing Operations Operations of Division X Provisions for Loss on Disposal Continuing Operations Operations of Division X Provisions for Loss on Disposal First quarter " $25,000 " " $(5,000)" " $11,250 " " $(3,250)" Second quarter " 35,000 " " (10,000)" " 15,750 " " (5,750)" Third quarter " 50,000 " " (10,000)" " $(55,000)" " 22,500 " " (3,500)" " $(27,500)" Fourth quarter " 50,000 " " 22,500 " Fiscal year " $160,000 " " $(25,000)" " $(55,000)" " $72,000 " " $(12,500)" " $(27,500)" ##### [270-740-55-37](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-37) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:742f57bb96b9ee2509c40ab96b80380d25cdaa98f3b516d7159cd005d0d87792 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in paragraph [740-270-30-36](https://asc.understandingaccounting.org/asc/270/740/#270-740-30-36) for accounting for income taxes applicable to ordinary income if an entity is subject to tax in multiple jurisdictions: 1. a Ordinary income in all jurisdictions (Case A) 2. b Ordinary loss in a jurisdiction; realization of the tax benefit not more likely than not (Case B) 3. c Ordinary income or tax cannot be estimated in one jurisdiction (Case C). ##### [270-740-55-38](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-38) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:f036837513236feb67fcbc199bb7911475f37ca4392776629ed7b9b3c04d719d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Cases A, B, and C assume that an entity operates through separate corporate entities in two countries. Applicable tax rates are 50 percent in the United States and 20 percent in Country A. The entity has no unusual or infrequently occurring items during the fiscal year and anticipates no tax credits or events that do not have tax consequences. (The effect of foreign tax credits and the necessity of providing tax on undistributed earnings are ignored because of the wide range of tax planning alternatives available.) For the full fiscal year the entity anticipates ordinary income of $60,000 in the United States and $40,000 in Country A. The entity is able to make a reliable estimate of its Country A ordinary income and tax for the fiscal year in dollars. Computation of the overall estimated annual effective tax rate in Cases B and C is based on additional assumptions stated in those Cases. ##### [270-740-55-39](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-39) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:b70be281e9c045340390eb2c2f3ae52831fc78dbbf2a128d2141730d9921b5aa Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Computation of the overall estimated annual effective tax rate is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-7D4315B6-4998-4BA1-9D43-BCD0FAE85E26-low.gif) Anticipated ordinary income for the fiscal year: In the United States " $60,000 " In Country A " 40,000 " Total " $100,000 " Anticipated tax for the fiscal year: "In the United States ($60,000 at 50% statutory rate)" " $30,000 " "In Country A ($40,000 at 20% statutory rate)" " 8,000 " Total " $38,000 " "Overall estimated annual effective tax rate ($38,000 ÷ $100,000)" 38% ##### [270-740-55-40](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-40) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:2fc27a71196839d6c74a55f8b444c023a0e4128dc62e63ca29fc7b40bdbdffae Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-DA6451DA-CC23-4B4C-9C7D-85629EC49BC0-low.gif) Ordinary Income Tax Reporting Period United States Country A Total Year-to-Date Overall Estimated Annual Effective Tax Rate Year-to-Date Less Previously Reported Reporting Period First quarter " $5,000 " " $15,000 " " $20,000 " " $20,000 " 38% " $7,600 " $- " $7,600 " Second quarter " 10,000 " " 10,000 " " 20,000 " " 40,000 " 38% " 15,200 " " 7,600 " " 7,600 " Third quarter " 10,000 " " 10,000 " " 20,000 " " 60,000 " 38% " 22,800 " " 15,200 " " 7,600 " Fourth quarter " 35,000 " " 5,000 " " 40,000 " " 100,000 " 38% " 38,000 " " 22,800 " " 15,200 " Fiscal year " $60,000 " " $40,000 " " $100,000 " " $38,000 " ##### [270-740-55-41](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-41) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:36701a0c08523613c371dd16ab94f27ac13be715d7d13414121c30f6e96d2125 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, the entity operates through a separate corporate entity in Country B. Applicable tax rates in Country B are 40 percent. Operations in Country B have resulted in losses in recent years and an ordinary loss is anticipated for the current fiscal year in Country B. It is expected that the tax benefit of those losses will not be recognizable as a deferred tax asset at the end of the current year pursuant to Subtopic 740-10; accordingly, no tax benefit is recognized for losses in Country B, and interim period tax (or benefit) is separately computed for the ordinary loss in Country B and for the overall ordinary income in the United States and Country A. The tax applicable to the overall ordinary income in the United States and Country A is computed as in Case A of this Example. Quarterly tax provisions are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-8038F2E3-EA02-4AED-AFCB-70F684F4C6B1-low.gif) Ordinary Income (or Loss) Tax (or Benefit) Reporting Period United States Country A Combined Excluding Country B Country B Total Combined Excluding Country B Country B Total First quarter " $5,000 " " $15,000 " " $20,000 " " $(5,000)" " $15,000 " " $7,600 " $- " $7,600 " Second quarter " 10,000 " " 10,000 " " 20,000 " " (25,000)" " (5,000)" " 7,600 " - " 7,600 " Third quarter " 10,000 " " 10,000 " " 20,000 " " (5,000)" " 15,000 " " 7,600 " - " 7,600 " Fourth quarter " 35,000 " " 5,000 " " 40,000 " " (5,000)" " 35,000 " " 15,200 " - " 15,200 " Fiscal year " $60,000 " " $40,000 " " $100,000 " " $(40,000)" " $60,000 " " $38,000 " $- " $38,000 " ##### [270-740-55-42](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-42) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:5e7dccc6eace585cbf8f8b8c67b63b1209ae54e51401f28064538b4cd16015e8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. In this Case, the entity operates through a separate corporate entity in Country C. Applicable tax rates in Country C are 40 percent in foreign currency. Depreciation in that country is large and exchange rates have changed in prior years. The entity is unable to make a reasonable estimate of its ordinary income for the year in Country C and thus is unable to reasonably estimate its annual effective tax rate in Country C in dollars. Accordingly, tax (or benefit) in Country C is separately computed as ordinary income (or loss) occurs in Country C. The tax applicable to the overall ordinary income in the United States and Country A is computed as in Case A of this Example. Quarterly computations of tax applicable to Country C are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-6DCB65BA-B753-42CD-A37E-A1A3EB2C34BC-low.gif) Foreign Currency (FC) Amounts Translated Amounts in Dollars Reporting Period Ordinary Income in Reporting Period Tax (at 40% rate) Ordinary Income in Reporting Period Tax First quarter " FC 10,000 " " FC 4,000 " " $12,500 " " $3,000 " Second quarter " 5,000 " " 2,000 " " 8,750 " " 1,500 " Third quarter " 30,000 " " 12,000 " " 27,500 " " 9,000 " Fourth quarter " 15,000 " " 6,000 " " 16,250 " " 4,500 " Fiscal year " FC 60,000 " " FC 24,000 " " $65,000 " " $18,000 " ##### [270-740-55-43](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-43) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:8c00a8fe5c92e2ce8738fe0278a6765f02ef6deaccfe38ce832381655c0433e6 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Quarterly tax provisions are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-4B756A19-9C83-4BFE-8385-D5A2097CDD0A-low.gif) Ordinary Income Tax Reporting Period United States Country A Combined Excluding Country C Country C Total Combined Excluding Country C Country C Total First quarter " $5,000 " " $15,000 " " $20,000 " " $12,500 " " $32,500 " " $7,600 " " $3,000 " " $10,600 " Second quarter " 10,000 " " 10,000 " " 20,000 " " 8,750 " " 28,750 " " 7,600 " " 1,500 " " 9,100 " Third quarter " 10,000 " " 10,000 " " 20,000 " " 27,500 " " 47,500 " " 7,600 " " 9,000 " " 16,600 " Fourth quarter " 35,000 " " 5,000 " " 40,000 " " 16,250 " " 56,250 " " 15,200 " " 4,500 " " 19,700 " Fiscal year " $60,000 " " $40,000 " " $100,000 " " $65,000 " " $165,000 " " $38,000 " " $18,000 " " $56,000 " ##### [270-740-55-44](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-44) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:595a23a4a1bed8eb4d9ea75aa6c6f7be2594d73cb79c558eb3920099decc9cca Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following Cases illustrate the guidance in paragraphs [740-270-25-5 through 25-6](https://asc.understandingaccounting.org/asc/270/740/#270-740-25-5) for accounting in interim periods for the effect of new tax legislation on income taxes when legislation is effective in a future interim period. 1. a [Subparagraph superseded by Accounting Standards Update No. 2019-12](https://asc.understandingaccounting.org/updates/asu-2019-12/). 2. b [Subparagraph superseded by Accounting Standards Update No. 2019-12](https://asc.understandingaccounting.org/updates/asu-2019-12/). ##### [270-740-55-45](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-45) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:035b00bdd0afeba516979331742de082b796b466a0d9746a25eb5c3d1c37ef59 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The assumed facts applicable to this Example follow. ##### [270-740-55-46](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-46) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:ebe87d17eba4e860abd5c17943f975d93a3e952ac1006d618ef9537731ba60d5 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For the full fiscal year, an entity anticipates ordinary income of $100,000. All income is taxable in one jurisdiction at a 50 percent rate. Anticipated tax credits for the fiscal year total $10,000. No events that do not have tax consequences are anticipated. ##### [270-740-55-47](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-47) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:1081fbfe3beba9c0b94ef8bd1cad5e70380a117369e9a07f898b1d176575726a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Computation of the estimated annual effective tax rate applicable to ordinary income is as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-606BB421-3BA9-49DF-B7D8-9639FC832F94-low.gif) "Tax at statutory rate ($100,000 at 50%)" " $50,000 " Less anticipated tax credits " (10,000)" Net tax to be provided " $40,000 " "Estimated annual effective tax rate ($40,000 ÷ $100,000)" 40% ##### [270-740-55-48](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-48) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:3f53fd96ec10e51085287a493e07a447120b83adade4399e28ecaccdb3c2191d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Further, assume that new legislation creating additional tax credits is enacted during the second quarter of the entity's fiscal year. The new legislation is effective on the first day of the third quarter. As a result of the estimated effect of the new legislation, the entity revises its estimate of its annual effective tax rate to the following. - ![](https://asc.understandingaccounting.org/asc-img/GUID-A5083201-1453-4B5B-965B-11ABCF5B605F-low.gif) "Tax at statutory rate ($100,000 at 50%)" " $50,000 " Less anticipated tax credits " (12,000)" Net tax to be provided " $38,000 " "Estimated annual effective tax rate ($38,000 ÷ $100,000)" 38% ##### [270-740-55-49](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-49) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:e65fe57f1f139995493ed4607fa6985c218cef59d2e264dd0275a903dde73811 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The effect of the new legislation 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. Accordingly, quarterly tax computations are as follows. - ![](https://asc.understandingaccounting.org/asc-img/GUID-50A3927F-8D9A-4D4F-8694-97CD8D6F6EEE-low.gif) Ordinary Income Tax Reporting Period Reporting Period Year-to-Date Estimated Annual Effective Tax Rate Year-to-Date Less Previously Provided Reporting Period First quarter " $20,000 " " $20,000 " 40% "$ 8,000" $- "$ 8,000" Second quarter " 20,000 " " 40,000 " 38% "15,200" "8,000" "7,200" Third quarter " 20,000 " " 60,000 " 38% "22,800" "15,200" "7,600" Fourth quarter " 40,000 " " 100,000 " 38% "38,000" "22,800" "15,200" Fiscal year " $100,000 " "$ 38,000" ##### [270-740-55-50](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-50) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:385a55979bcb0b73c0d7194a97e6278031da835937f7c9b7b5aa67748dc9e248 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2019-12](https://asc.understandingaccounting.org/updates/asu-2019-12/) ##### [270-740-55-51](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-51) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:4f2f591d67c4e9a26dac2836a4984ac842225b8ba3c2990fe51f4ff75ea3abc8 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. [Paragraph superseded by Accounting Standards Update No. 2019-12](https://asc.understandingaccounting.org/updates/asu-2019-12/) ##### [270-740-55-52](https://asc.understandingaccounting.org/asc/270/740/#270-740-55-52) Pending content: no Source downloaded (UTC): 2026-09-09T23:20:44.855Z to 2026-09-09T23:20:44.855Z Record version: sha256:e7dcc71536d0dc5fb545e6bb8990d7f2797aff3a75c65adabc49b8a6ddc92446 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The following illustrates the location in an income statement display of the various tax amounts computed under this Subtopic. - ![](https://asc.understandingaccounting.org/asc-img/GUID-920A2660-5567-4757-8554-D23B9F2BD544-low.gif) Net sales (a) $XXXX Other income (a) XXX XXXX Costs and expenses: Cost of sales (a) $XXXX "Selling, general, and administrative expenses (a)" XXXX Interest expense (a) XXX Other deductions (a) XX Unusual items XXX Infrequently occurring items XXX XXXX Income (loss) from continuing operations before income taxes and other items listed below XXXX Provision for income taxes (benefit) (b) XXXX Income (loss) from continuing operations before other items listed below XXXX Discontinued operations: "Income (loss) from operations of discontinued Component X (less applicable income taxes of $XXXX)" XXXX XXXX Income (loss) before extraordinary items XXXX Extraordinary items (less applicable income taxes of $XXXX) XXXX Net income (loss) $XXXX (a) Components of ordinary income (loss). (b) "Consists of the total of income taxes (or benefit) applicable to ordinary income, unusual items, and infrequently occurring items."