# ASC 740-10-10: Income Taxes — Overall — 10 Objectives Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/740/10/#10-objectives) 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): 2026-09-10T01:16:18.271Z to 2026-09-10T01:16:18.271Z Record version: sha256:e5ecd26cfd8d761536b6bd8cac4091074ba0d774afe9c2a0532167c591f78215 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 740-10-10: 10 Objectives [Read section](https://asc.understandingaccounting.org/asc/740/10/#10-objectives) SEC content: no ##### [740-10-10-1](https://asc.understandingaccounting.org/asc/740/10/#740-10-10-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:18.271Z to 2026-09-10T01:16:18.271Z Record version: sha256:132f0c321a0a1d99af10f8406cda16348614197051bd253d5847ee811eab4004 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. There are two primary objectives related to 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."): 1. a To recognize the amount of taxes payable or refundable for the current year 2. b To recognize deferred tax liabilities and assets for the future [tax consequences](https://asc.understandingaccounting.org/glossary/t/#tax-consequences "The effects on income taxes—current or deferred—of an event.") of events that have been recognized in an entity's financial statements or tax returns. As it relates to the second objective, some events do not have tax consequences. Certain revenues are exempt from taxation and certain expenses are not deductible. In some tax jurisdictions, for example, interest earned on certain municipal obligations is not taxable and fines are not deductible. ##### [740-10-10-2](https://asc.understandingaccounting.org/asc/740/10/#740-10-10-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:18.271Z to 2026-09-10T01:16:18.271Z Record version: sha256:973145cb265d0744e39c373caa5f9f26856e4c186143ae8ccb3ee067a667107e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Ideally, the second objective might be stated more specifically to recognize the expected future tax consequences of events that have been recognized in the financial statements or tax returns. However, that objective is realistically constrained because: 1. a The tax payment or refund that results from a particular tax return is a joint result of all the items included in that return. 2. b Taxes that will be paid or refunded in future years are the joint result of events of the current or prior years and events of future years. 3. c Information available about the future is limited. As a result, attribution of taxes to individual items and events is arbitrary and, except in the simplest situations, requires estimates and approximations. ##### [740-10-10-3](https://asc.understandingaccounting.org/asc/740/10/#740-10-10-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:16:18.271Z to 2026-09-10T01:16:18.271Z Record version: sha256:8a28b4d6cac4e1d8e685b6772299715c05df82a21db4967487e3e7b0b0e5fd5e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Conceptually, 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](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.") represents the increase or decrease in taxes payable or refundable in future years as a result of [temporary differences](https://asc.understandingaccounting.org/glossary/t/#temporary-difference "A difference between the tax basis of an asset or liability computed pursuant to the requirements in Subtopic 740-10 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. Paragraph 740-10-25-20 cites examples of temporary differences. Some temporary differences cannot be identified with a particular asset or liability for financial reporting (see paragraphs 740-10-05-10 and 740-10-25-24740-10-25-25), but those temporary differences do meet both of the following conditions: Result from events that have been recognized in the financial statements Will result in taxable or deductible amounts in future years based on provisions of the tax law. Some events recognized in financial statements do not have tax consequences. Certain revenues are exempt from taxation and certain expenses are not deductible. Events that do not have tax consequences do not give rise to 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.") at the end of the current year. That concept is an incremental concept. A literal application of that concept would result in measurement of the incremental tax effect as the difference between the following two measurements: 1. a The amount of taxes that will be payable or refundable in future years inclusive of reversing temporary differences and carryforwards 2. b The amount of taxes that would be payable or refundable in future years exclusive of reversing temporary differences and carryforwards. However, in light of the constraints identified in the preceding paragraph, in computing the amount of deferred tax liabilities and assets, the objective is to measure a deferred tax liability or asset using the enacted tax rate(s) expected to apply to [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.") in the periods in which the deferred tax liability or asset is expected to be settled or realized.