deferred tax liability

Expenses4

1. 740-10Overall740 Income Taxes

   ASC 740-10 is the Overall subtopic for income taxes and contains the core asset-and-liability model: recognize (1) current taxes payable or refundable for the year and (2) deferred tax assets and liabilities for the future tax consequences of temporary differences and operating loss/tax credit carryforwards (740-10-10-1; 740-10-25-2). Deferred taxes are measured using enacted tax rates expected to apply when the item reverses, are not discounted, and deferred tax assets are reduced by a valuation allowance if it is more likely than not that some or all will not be realized (740-10-30-5, 740-10-30-8). It also houses the two-step uncertain tax position model — more-likely-than-not recognition on technical merits, then measurement at the largest benefit greater than 50 percent likely of being realized on settlement (740-10-25-6; 740-10-30-7).

2. 740-30Other Considerations or Special Areas740 Income Taxes

   ASC 740-30 governs the limited exceptions to comprehensive deferred tax recognition for temporary differences (outside basis differences) arising from investments in subsidiaries and corporate joint ventures, principally undistributed earnings. The starting presumption is that all undistributed earnings of a subsidiary will be transferred to the parent and thus create a taxable temporary difference (740-30-25-3), but that presumption can be overcome by the "indefinite reversal criteria" for foreign subsidiaries/foreign corporate joint ventures essentially permanent in duration and for pre-December 16, 1992 domestic undistributed earnings (740-30-25-17 and 25-18). Deferred tax assets for excess outside tax basis are recognized only if it is apparent the difference will reverse in the foreseeable future (740-30-25-9).

3. 740-944Financial Services—Insurance740 Income Taxes

   This Subtopic applies Topic 740's income tax model to insurance entities. Deferred tax liabilities and assets are recognized for temporary differences generally, but a life insurance entity does not provide deferred taxes on taxable temporary differences related to policyholders' surplus arising in fiscal years beginning on or before December 15, 1992 — unless a known or expected reduction in that surplus makes tax payment likely, in which case the attributable tax is accrued currently. Disclosure of unrecognized deferred tax liabilities under the Topic 740 exceptions is required.

4. 740-980Regulated Operations740 Income Taxes

   This subtopic applies ASC 740 to entities whose rates are regulated and that meet the criteria in 980-10-15-2. It prohibits net-of-tax accounting, requires a deferred tax liability for tax benefits flowed through to customers and for the equity component of the allowance for funds used during construction (AFUDC), and requires deferred taxes to be adjusted for enacted changes in tax law or rates. When it is probable that a regulator will allow recovery from (or require refund to) customers of those future tax amounts, the entity recognizes a separate regulatory asset or liability, which is itself a temporary difference generating additional deferred tax.