{"schema_version":2,"canonical_url":"https://asc.understandingaccounting.org/asc/740/10/#05-overview-and-background","source":"FASB Accounting Standards Codification, Basic View","usage":"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.","topic":"740","topic_title":"Income Taxes","subtopic":"740-10","subtopic_title":"Overall","section":{"number":"05","label":"05 Overview and Background","anchor":"05-overview-and-background","is_sec":false,"groups":[{"block":null,"heading":null,"paragraphs":[{"citation":"740-10-05-1","para":"05-1","html":"
The Income Taxes Topic addresses financial accounting and reporting for the effects of income taxes that result from an entity's activities during the current and preceding years. Specifically, this Topic establishes standards of financial accounting and reporting for income taxes that are currently payable and for the tax consequences of all of the following:
  1. a
    Revenues, expenses, gains, or losses that are included in taxable income of an earlier or later year than the year in which they are recognized in financial income
  2. b
    Other events that create differences between the tax bases of assets and liabilities and their amounts for financial reporting
  3. c
    Operating loss or tax credit carrybacks for refunds of taxes paid in prior years and carryforwards to reduce taxes payable in future years.
","snippet":"The Income Taxes Topic addresses financial accounting and reporting for the effects of income taxes that result from an entity's activities during the current and preceding years. Specifically, this Topic establishes sta…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:a9fc5d5bcafe9787e9d07dd5813ca78e71ace1c363ba2043fd35e7b4bd8207b1","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-2","para":"05-2","html":"
This Topic includes the following Subtopics:
  1. a
    Overall
  2. b
    Intraperiod Tax Allocation
  3. c
    Other Considerations or Special Areas
  4. d
    Interim Reporting.
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The Overall Subtopic provides the majority of the accounting and reporting guidance related to income taxes. The other Subtopics in this Topic provide more detailed guidance on narrower elements of accounting and reporting for income taxes.
","snippet":"The Overall Subtopic provides the majority of the accounting and reporting guidance related to income taxes. The other Subtopics in this Topic provide more detailed guidance on narrower elements of accounting and reporti…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:7c414dc71d3225909bc063f47847adde25923fb73b5f40cc51890c382eb0b0f0","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-4","para":"05-4","html":"
Other Topics, including industry-specific Topics, may also have Income Taxes Subtopics that address the Topic-specific requirements for income taxes. Guidance in those Subtopics is intended to be incremental to the guidance otherwise established in the Income Taxes Topic. Topics with incremental Income Taxes Subtopics are:
  1. a
    Investments—Equity Method and Joint Ventures, Subtopic 323-740
  2. b
    Compensation—Stock Compensation, Subtopic 718-740
  3. c
    Business Combinations, Subtopic 805-740
  4. d
    Foreign Currency Matters, Subtopic 830-740
  5. e
    Reorganizations, Subtopic 852-740
  6. f
    Entertainment—Casinos, Subtopic 924-740
  7. g
    Extractive Activities—Oil and Gas, Subtopic 932-740
  8. h
    Financial Services—Depository and Lending, Subtopic 942-740
  9. i
    Financial Services—Insurance, Subtopic 944-740
  10. j
    Health Care Entities, Subtopic 954-740
  11. k
    Real Estate—Common Interest Realty Associations, Subtopic 972-740
  12. l
    Regulated Operations, Subtopic 980-740
  13. m
    Subparagraph superseded by Accounting Standards Update No. 2017-15.
","snippet":"Other Topics, including industry-specific Topics, may also have Income Taxes Subtopics that address the Topic-specific requirements for income taxes. Guidance in those Subtopics is intended to be incremental to the guida…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:766d4d88a59087bd11e082e496b59866585ce8a94ff4338d1597b4780c77fc89","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-5","para":"05-5","html":"
There are two basic principles related to accounting for income taxes, each of which considers uncertainty through the application of recognition and measurement criteria:
  1. a
    To recognize the estimated taxes payable or refundable on tax returns for the current year as a tax liability or asset
  2. b
    To recognize a deferred tax liability or asset for the estimated future tax effects attributable to temporary differences and carryforwards.
","snippet":"There are two basic principles related to accounting for income taxes, each of which considers uncertainty through the application of recognition and measurement criteria:\n(a) To recognize the estimated taxes payable or …","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:5d07a6d99f568abee99bdecb219d141aa5c5d468af148e68f62546c2e7ccf9be","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-6","para":"05-6","html":"
This Subtopic provides guidance for recognizing and measuring tax positions taken or expected to be taken in a tax return that directly or indirectly affect amounts reported in financial statements. This Subtopic also provides accounting guidance for the related income tax effects of individual tax positions that do not meet the recognition thresholds required in order for any part of the benefit of that tax position to be recognized in an entity's financial statements. Under this Subtopic, a tax position is first evaluated for recognition based on its technical merits. Tax positions that meet a recognition criterion are then measured to determine an amount to recognize in the financial statements. That measurement incorporates information about potential settlements with taxing authorities.
","snippet":"This Subtopic provides guidance for recognizing and measuring tax positions taken or expected to be taken in a tax return that directly or indirectly affect amounts reported in financial statements. This Subtopic also pr…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:95c249782428b79658d780b147e1d05f958c54671ac93e148313b7a792302806","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-7","para":"05-7","html":"
A temporary difference refers to a difference between the tax basis of an asset or liability, determined based on recognition and measurement requirements for tax positions, and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively. Deferred tax assets and liabilities represent the future effects on income taxes that result from temporary differences and carryforwards that exist at the end of a period. Deferred tax assets and liabilities are measured using enacted tax rates and provisions of the enacted tax law and are not discounted to reflect the time-value of money.
","snippet":"A temporary difference refers to a difference between the tax basis of an asset or liability, determined based on recognition and measurement requirements for tax positions, and its reported amount in the financial state…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3a62ce21e79162a2e0e170c24376cb07a7c4db95d2d935908cd05958a2d64108","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-8","para":"05-8","html":"
As indicated in paragraph 740-10-25-23, temporary differences that will result in taxable amounts in future years when the related asset or liability is recovered or settled are often referred to as taxable temporary differences. Likewise, temporary differences that will result in deductible amounts in future years are often referred to as deductible temporary differences. Business combinations and joint venture formations may give rise to both taxable and deductible temporary differences.
","snippet":"As indicated in paragraph 740-10-25-23, temporary differences that will result in taxable amounts in future years when the related asset or liability is recovered or settled are often referred to as taxable temporary dif…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:213f4787c85dbcb89efa5848e33cf349ab63c38d12cb2107a75e8bdc786480b3","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-9","para":"05-9","html":"
As indicated in paragraph 740-10-25-30, certain basis differences may not result in taxable or deductible amounts in future years when the related asset or liability for financial reporting is recovered or settled and, therefore, may not be temporary differences for which a deferred tax liability or asset is recognized.
","snippet":"As indicated in paragraph 740-10-25-30, certain basis differences may not result in taxable or deductible amounts in future years when the related asset or liability for financial reporting is recovered or settled and, t…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e85f739030392dc421de68f09f6c7590b4b195103162c8248e63502b15c30052","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},{"citation":"740-10-05-10","para":"05-10","html":"
As indicated in paragraph 740-10-25-24, some temporary differences are deferred taxable income or tax deductions and have balances only on the income tax balance sheet and therefore cannot be identified with a particular asset or liability for financial reporting. In such instances, there is no related, identifiable asset or liability for financial reporting, but there is a temporary difference that results from an event that has been recognized in the financial statements and, based on provisions in the tax law, the temporary difference will result in taxable or deductible amounts in future years.
","snippet":"As indicated in paragraph 740-10-25-24, some temporary differences are deferred taxable income or tax deductions and have balances only on the income tax balance sheet and therefore cannot be identified with a particular…","pending":false,"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:e91ba87d300f8b5a3e48436e45ab97bc38d5898c45793aafd982282b3f83d54f","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:155591ea3cd80ef7dfe69dc6802a8561180663847ed296b908c57982190fd37a","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}}],"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b8240374965263bd08f5603e966be42ff80453a7ed4683fd01d5f28c3c935d9","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}},"provenance":{"source_url":"https://asc.fasb.org/","snapshot_version":"sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f","record_version":"sha256:3b8240374965263bd08f5603e966be42ff80453a7ed4683fd01d5f28c3c935d9","downloaded_from":"2026-09-10T01:16:15.857Z","last_downloaded_at":"2026-09-10T01:16:15.857Z","date_scope":"source_page","effective_as_of":null,"effective_as_of_status":"Not established by retrieval timestamps","source_key":"1943274/2147482519","source_sha256":"ae99c9251cfe3cf628a3411a03f21eff678e4b5ee02d9f896afc6a73fce64439"}}