# ASC 740-30-25: Income Taxes — Other Considerations or Special Areas — 25 Recognition Source: FASB Accounting Standards Codification, Basic View [Read online](https://asc.understandingaccounting.org/asc/740/30/#25-recognition) Study and research edition. Verify current requirements with the official source. Summaries, enrichment, and tags are machine-generated study aids. Paragraph html preserves source markup; snippet is abbreviated. Pending content is not necessarily effective. Tables and mathematical or amendment markup are retained as HTML where Markdown would lose structure. Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:3a29e504613fd90d3b82142069987854f63c36a052b908421d0198efed612aed Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. ## ASC 740-30-25: 25 Recognition [Read section](https://asc.understandingaccounting.org/asc/740/30/#25-recognition) SEC content: no #### Undistributed Earnings of Subsidiaries and Corporate Joint Ventures ##### [740-30-25-1](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-1) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:e0c2b35edf22676673d264cc5da3f1d6154ad94a7612273b4a1e40aa1b810da0 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. This Section provides guidance on the accounting for specific temporary differences related to investments in subsidiaries and [corporate joint ventures](https://asc.understandingaccounting.org/glossary/c/#corporate-joint-venture "A corporation owned and operated by a small group of entities (the joint venturers) as a separate and specific business or project for the mutual benefit of the members of the group. A government may also be a member of the group. The purpose of a corporate joint venture frequently is to share risks and rewards in developing a new market, product or technology; to combine complementary technological knowledge; or to pool resources in developing production or other facilities. A corporate joint venture also usually provides an arrangement under which each joint venturer may participate, directly or indirectly, in the overall management of the joint venture. Joint venturers thus have an interest or relationship other than as passive investors. An entity that is a subsidiary of one of the joint venturers is not a corporate joint venture. The ownership of a corporate joint venture seldom changes, and its stock is usually not traded publicly. A noncontrolling interest held by public ownership, however, does not preclude a corporation from being a corporate joint venture."), including differences arising from undistributed earnings. In certain situations, these temporary differences may be accounted for differently from the accounting that otherwise requires comprehensive recognition of deferred [income taxes](https://asc.understandingaccounting.org/glossary/i/#income-taxes "Domestic and foreign federal (national), state, and local (including franchise) taxes based on income.") for temporary differences. ##### [740-30-25-2](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-2) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:7d6754a2beb7c4149f45e34b2989e00ed457a53face2148dafe4ebc618d17924 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Including undistributed earnings of a subsidiary (which would include the undistributed earnings of a domestic international sales corporation eligible for tax deferral) in the pretax accounting income of a parent entity either through consolidation or accounting for the investment by the equity method results in a [temporary difference](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."). ##### [740-30-25-3](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-3) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:b5bf6a36e8b40cbbcbb4845e7c3e4f626ae55d8b7ec6d8a11ffa3e5b3644ff57 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. It shall be presumed that all undistributed earnings of a subsidiary will be transferred to the parent entity. Accordingly, the undistributed earnings of a subsidiary included in consolidated income shall be accounted for as a temporary difference unless the tax law provides a means by which the investment in a domestic subsidiary can be recovered tax free. ##### [740-30-25-4](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-4) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:3b6a4fbfd0c0bfac08181c927d34ae1e26d9d9b70e21f337a8a79a24b166351a Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The principles applicable to undistributed earnings of subsidiaries in this Section also apply to tax effects of differences between [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.") and pretax accounting income attributable to earnings of corporate joint ventures that are essentially permanent in duration and are accounted for by the equity method. Certain corporate joint ventures have a life limited by the nature of the venture, project, or other business activity. Therefore, a reasonable assumption is that a part or all of the undistributed earnings of the venture will be transferred to the investor in a taxable distribution. Deferred taxes shall be recorded, in accordance with the requirements of Subtopic 740-10 at the time the earnings (or losses) are included in the investor's income. ##### [740-30-25-5](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-5) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:b01ace5c6a2e718247fc550828c02ef5da36b99aeff39e47876f890f79088e44 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") shall be recognized for both of the following types of taxable temporary differences: 1. a An excess of the amount for financial reporting over the tax basis of an investment in a domestic subsidiary that arises in fiscal years beginning after December 15, 1992 2. b An excess of the amount for financial reporting over the tax basis of an investment in a 50-percent-or-less-owned investee except as provided in paragraph [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18) for a corporate joint venture that is essentially permanent in duration. Paragraphs [740-30-25-9](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-9) and [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18) identify exceptions to the accounting that otherwise requires comprehensive recognition of deferred income taxes for temporary differences arising from investments in subsidiaries and corporate joint ventures. ##### [740-30-25-6](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-6) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:d4e0af391776ac30ff28783a9171924eb9ca445df8cc7a799b44e8f1534e1df4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18) provides that a deferred tax liability is not recognized for either of the following: 1. a An excess of the amount for financial reporting over the tax basis of an investment in a foreign subsidiary that meets the criteria in paragraph [740-30-25-17](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-17) 2. b Undistributed earnings of a domestic subsidiary that arose in fiscal years beginning on or before December 15, 1992, and that meet the criteria in paragraph [740-30-25-17](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-17). The criteria in that paragraph do not apply to undistributed earnings of domestic subsidiaries that arise in fiscal years beginning after December 15, 1992, and as required by the preceding paragraph, a deferred tax liability shall be recognized if the undistributed earnings are a [taxable temporary difference](https://asc.understandingaccounting.org/glossary/t/#taxable-temporary-difference "Temporary differences that result in taxable amounts in future years when the related asset is recovered or the related liability is settled. See Temporary Difference."). ##### [740-30-25-7](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-7) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:111beef9d5372c85ba1800c29b7736a034e76db3ade5146ce0a001148c927d8c Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Whether an excess of the amount for financial reporting over the tax basis of an investment in a more-than-50-percent-owned domestic subsidiary is a taxable temporary difference shall be assessed. It is not a taxable temporary difference if the tax law provides a means by which the reported amount of that investment can be recovered tax-free and the entity expects that it will ultimately use that means. For example, tax law may provide that: 1. a An entity may elect to determine taxable gain or loss on the liquidation of an 80-percent-or-more-owned subsidiary by reference to the tax basis of the subsidiary's net assets rather than by reference to the [parent](https://asc.understandingaccounting.org/glossary/p/#parent "An entity that has a controlling financial interest in one or more subsidiaries. (Also, an entity that is the primary beneficiary of a variable interest entity.)") entity's tax basis for the stock of that subsidiary. 2. b An entity may execute a statutory merger whereby a subsidiary is merged into the parent entity, the noncontrolling shareholders receive stock of the parent, the subsidiary's stock is cancelled, and no taxable gain or loss results if the continuity of ownership, continuity of business entity, and certain other requirements of the tax law are met. ##### [740-30-25-8](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-8) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:69e82d7775693fbd548a925e2e910bfdc5af755677b988b3936f9d99eecad0fe Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Some elections for tax purposes are available only if the parent owns a specified percentage of the subsidiary's stock. The parent sometimes may own less than that specified percentage, and the price per share to acquire a [noncontrolling interest](https://asc.understandingaccounting.org/glossary/n/#noncontrolling-interest "The portion of equity (net assets) in a subsidiary not attributable, directly or indirectly, to a parent. A noncontrolling interest is sometimes called a minority interest.") may significantly exceed the per-share equivalent of the amount reported as noncontrolling interest in the [consolidated financial statements](https://asc.understandingaccounting.org/glossary/c/#consolidated-financial-statements "The financial statements of a consolidated group of entities that include a parent and all its subsidiaries presented as those of a single economic entity."). In those circumstances, the excess of the amount for financial reporting over the tax basis of the parent's investment in the subsidiary is not a taxable temporary difference if settlement of the noncontrolling interest is expected to occur at the point in time when settlement would not result in a significant cost. That could occur, for example, toward the end of the life of the subsidiary, after it has recovered and settled most of its assets and liabilities, respectively. The fair value of the noncontrolling interest ordinarily will approximately equal its percentage of the subsidiary's net assets if those net assets consist primarily of cash. ##### [740-30-25-9](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-9) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:a0140433123e2361bc8d4b8020839275c207bbc9498d2d5d6355b1bb6fe4c71e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. 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.") shall be recognized for an excess of the tax basis over the amount for financial reporting of an investment in a subsidiary or corporate joint venture that is essentially permanent in duration only if it is apparent that the temporary difference will reverse in the foreseeable future. ##### [740-30-25-10](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-10) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:c320f8f516efab1dc2f2a5cf69780042084cf61572b44034756cd18562b2ad1e Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. For example, if an entity decides to sell a subsidiary that meets the requirements of paragraphs [205-20-45-1A through 45-1D](https://asc.understandingaccounting.org/asc/205/20/#205-20-45-1A) for measurement and display as a discontinued operation and the parent entity's tax basis in the stock of the subsidiary (outside tax basis) exceeds the financial reporting amount of the investment in the subsidiary, the decision to sell the subsidiary makes it apparent that the [deductible temporary difference](https://asc.understandingaccounting.org/glossary/d/#deductible-temporary-difference "Temporary differences that result in deductible amounts in future years when the related asset or liability is recovered or settled, respectively. See Temporary Difference.") will reverse in the foreseeable future. Assuming in this example that it is more likely than not that the deferred tax asset will be realized, the tax [benefit](https://asc.understandingaccounting.org/glossary/b/#benefit "See Tax (or Benefit).") for the excess of outside tax basis over financial reporting basis shall be recognized when it is apparent that the temporary difference will reverse in the foreseeable future. The same criterion shall apply for the recognition of a deferred tax liability related to an excess of financial reporting basis over outside tax basis of an investment in a subsidiary that was previously not recognized under the provisions of paragraph [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18). ##### [740-30-25-11](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-11) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:d91787055aa34db3e621ce353ecba493e409b73b6ae6ccc69cbfa61d245e8b18 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The need for 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.") for the deferred tax asset referred to in paragraph [740-30-25-9](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-9) and other related deferred tax assets, such as a deferred tax asset for foreign tax credit [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."), shall be assessed. ##### [740-30-25-12](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-12) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:6ffab6cfef6f16e49348fe5687a3683b1f42d649f1258b0871a52b6f507f479d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Paragraph [740-10-30-18](https://asc.understandingaccounting.org/asc/740/10/#740-10-30-18) identifies four sources of taxable income to be considered in determining the need for and amount of a valuation allowance for those and other deferred tax assets. One source is future reversals of temporary differences. ##### [740-30-25-13](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-13) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:050e72ead72d549540b4aa5b9a842023ab23c7369dd7ae2dbc72603e3fce1103 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. Future distributions of future earnings of a subsidiary or corporate joint venture, however, shall not be considered except to the extent that a deferred tax liability has been recognized for existing undistributed earnings or earnings have been remitted in the past. ##### [740-30-25-14](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-14) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:df19c3707b1b458a524675e6d8ab242abc42880fc7a53474c7e09c676e0c1c62 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. A tax benefit shall not be recognized, however, for tax deductions or favorable tax rates attributable to future dividends of undistributed earnings for which a deferred tax liability has not been recognized under the requirements of paragraph [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18). ##### [740-30-25-15](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-15) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:c5608319bff3d91926f9f90cd31675d27b7ed6ab727a477baf26d96ef053b75b Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. An investment in common stock of a subsidiary may change so that it is no longer a subsidiary because the parent entity sells a portion of the investment, the subsidiary sells additional stock, or other transactions affect the investment. If a parent entity did not recognize income taxes on its equity in undistributed earnings of a subsidiary for the reasons cited in paragraph [740-30-25-17](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-17) (and the entity in which the investment is held ceases to be a subsidiary), it shall accrue in the current period income taxes on the temporary difference related to its remaining investment in common stock in accordance with the guidance in Subtopic 740-10. ##### [740-30-25-16](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-16) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:23ab96b8c89b346406fed14b8a14b1702bfc976634b3846dc3082f2567ca9f9b 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/) ##### [740-30-25-17](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-17) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:78bca784b059591122e7ba5ecd13a54f5d744b5b47dd6c20d87eb1c43ed0139d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. The presumption in paragraph [740-30-25-3](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-3) that all undistributed earnings will be transferred to the parent entity may be overcome, and no income taxes shall be accrued by the parent entity, for entities and periods identified in the following paragraph if sufficient evidence shows that the subsidiary has invested or will invest the undistributed earnings indefinitely or that the earnings will be remitted in a tax-free liquidation. A parent entity shall have evidence of specific plans for reinvestment of undistributed earnings of a subsidiary which demonstrate that remittance of the earnings will be postponed indefinitely. These criteria required to overcome the presumption are sometimes referred to as the indefinite reversal criteria. Experience of the entities and definite future programs of operations and remittances are examples of the types of evidence required to substantiate the parent entity's representation of indefinite postponement of remittances from a subsidiary. The indefinite reversal criteria shall not be applied to the inside basis differences of foreign subsidiaries. ##### [740-30-25-18](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-18) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:e3c9b898d153eb6a18b5b7358b9b036b5d27d113e7543cc89b6c6825086450c4 Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. As indicated in paragraph [740-10-25-3](https://asc.understandingaccounting.org/asc/740/10/#740-10-25-3), a deferred tax liability shall not be recognized for either of the following types of temporary differences unless it becomes apparent that those temporary differences will reverse in the foreseeable future: 1. a An excess of the amount for financial reporting over the tax basis of an investment in a foreign subsidiary or a foreign corporate joint venture that is essentially permanent in duration 2. b Undistributed earnings of a domestic subsidiary or a domestic corporate joint venture that is essentially permanent in duration that arose in fiscal years beginning on or before December 15, 1992. A last-in, first-out (LIFO) pattern determines whether reversals pertain to differences that arose in fiscal years beginning on or before December 15, 1992. ##### [740-30-25-19](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-19) Pending content: no Source downloaded (UTC): 2026-09-10T01:17:53.003Z to 2026-09-10T01:17:53.003Z Record version: sha256:b34549f9d432bbc9d9c4623919cd90e17745ec12f26bebe826598ff32387907d Snapshot version: sha256:15aea8165dff9f5ae47d9484f8470588b13b307f56e1d50801bf4d85ec190e3f Effective as of: not established by retrieval timestamps. If circumstances change and it becomes apparent that some or all of the undistributed earnings of a subsidiary will be remitted in the foreseeable future but income taxes have not been recognized by the parent entity, it shall accrue as an expense of the current period income taxes attributable to that remittance. If it becomes apparent that some or all of the undistributed earnings of a subsidiary on which income taxes have been accrued will not be remitted in the foreseeable future, the parent entity shall adjust income tax expense of the current period.