# ASC 740-942-25: Income Taxes — Financial Services—Depository and Lending — 25 Recognition

Source: FASB Accounting Standards Codification, Basic View

[Read online](https://asc.understandingaccounting.org/asc/740/942/#25-recognition)

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## ASC 740-942-25: 25 Recognition

[Read section](https://asc.understandingaccounting.org/asc/740/942/#25-recognition)

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#### Deferred Tax Liability

##### [740-942-25-1](https://asc.understandingaccounting.org/asc/740/942/#740-942-25-1)

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As described 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 the following types of temporary differences unless it becomes apparent that those temporary differences will reverse in the foreseeable future:

1.  a
    
    Bad debt reserves for tax purposes of U.S. savings and loan associations (and other qualified thrift lenders) that arose in tax years beginning before December 31, 1987 (that is, the base-year amount).
    

However, if circumstances indicate that the association is likely to pay income taxes, either currently or in later years, because of known or expected reductions in the bad debt reserve, income taxes attributable to that reduction shall be accrued as tax expense of the current period.

##### [740-942-25-2](https://asc.understandingaccounting.org/asc/740/942/#740-942-25-2)

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Paragraph [740-30-25-5](https://asc.understandingaccounting.org/asc/740/30/#740-30-25-5) requires that a deferred tax liability be recognized for the following types of taxable temporary differences:

1.  a
    
    Bad debt reserves for tax purposes of U.S. savings and loan associations (and other qualified thrift lenders) that arise in tax years beginning after December 31, 1987 (that is, amounts in excess of the base-year amount).

#### Deferred Tax Asset

##### [740-942-25-3](https://asc.understandingaccounting.org/asc/740/942/#740-942-25-3)

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The entity shall assess the need for a valuation allowance for deferred tax assets related to a savings and loan association's bad-debt reserve for financial reporting.

##### [740-942-25-4](https://asc.understandingaccounting.org/asc/740/942/#740-942-25-4)

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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. Future reversals of taxable differences for which a deferred tax liability has not been recognized based on the exceptions cited in paragraph [740-10-25-3](https://asc.understandingaccounting.org/asc/740/10/#740-10-25-3), however, shall not be considered. Another source is future taxable income exclusive of reversing temporary differences and carryforwards.