The following table identifies the changes made to this Subtopic.
This Subtopic provides recognition, measurement, and disclosure guidance for deferred tax assets and liabilities of stock and mutual savings and loan associations and mutual savings banks.
Regulatory authorities require both stock and mutual savings and loan associations to appropriate a portion of earnings to general reserves and to retain the reserves as a protection for depositors. The terms general reserves and reserve for bad debts are used in the context of the special meaning these terms have in regulatory pronouncements and in the U.S. Internal Revenue Code. Provisions of the U.S. Internal Revenue Code permit a savings and loan association to deduct an annual addition to a reserve for bad debts in determining taxable income, subject to certain limitations. This annual addition permitted by the Internal Revenue Code generally differs significantly from the bad debt experience upon which determination of pretax accounting income is based. Thus, taxable income and pretax accounting income of an association usually differ.
Although a general reserve determined according to requirements of the regulatory authorities is not directly related to a reserve for bad debts computed according to provisions of the U.S. Internal Revenue Code, the purposes and restrictions of each reserve are similar. Amounts of bad debt deductions for income tax purposes are includable in taxable income of later years only if the bad debt reserves are used subsequently for purposes other than to absorb bad debt losses.
This Subtopic follows the same Scope and Scope Exceptions as outlined in the Overall Subtopic, see Section
942-10-15, with specific entity exceptions noted below.
The guidance in this Subtopic is applicable to stock and mutual savings and loan associations and mutual savings banks.
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.
The base-year tax reserve is the income tax bad-debt reserve that arose in tax years beginning before December 31, 1987 as provided by the income tax law changes enacted in 1986. The excess of a tax bad-debt reserve over the base-year reserve is a temporary difference for which deferred taxes must be provided.
The disclosure requirements set forth in the preceding paragraph also apply to a parent entity of a savings and loan association accounting for that investment either through consolidation or by the equity method.