Section
740-10-25 addresses recognition of current and deferred income tax accounts, including accrued interest and penalties. The guidance in this Section addresses certain subsequent events that result in derecognizing previously recognized amounts and is incremental to the guidance for recognition.
An entity shall derecognize a previously recognized tax position in the first period in which it is no longer more likely than not that the tax position would be sustained upon examination. Use of a valuation allowance is not a permitted substitute for derecognizing the benefit of a tax position when the more-likely-than-not recognition threshold is no longer met. Derecognition shall be based on management's best judgment given the facts, circumstances, and information available at the reporting date. Paragraph
740-10-30-7 explains that the reporting date is the date of the entity's most recent statement of financial position.
Subsequent changes in judgment that lead to derecognition shall result from the evaluation of new information and not from a new evaluation or new interpretation by management of information that was available in a previous financial reporting period. If an entity that had previously considered a tax position effectively settled becomes aware that the taxing authority may examine or reexamine the tax position or intends to appeal or litigate any aspect of the tax position, the tax position is no longer considered effectively settled and the entity shall reevaluate the tax position in accordance with the requirements of this Subtopic for tax positions.
Paragraph 740-10-25-15 requires that a change in judgment that results in derecognition of a tax position taken in a prior annual period (including any related interest and penalties) shall be recognized as a discrete item in the period in which the change occurs. Paragraph
740-270-35-6 addresses the different accounting required for such changes in a prior interim period within the same fiscal year.
A tax position that did not meet the recognition requirements of paragraph
740-10-25-6 may have resulted in the accrual of interest and penalties under the requirements of paragraphs
.
Previously recognized interest and penalties associated with tax positions that subsequently meet one of the conditions in paragraph 740-10-25-8 shall be derecognized in the period that condition is met.