The document provides guidance on accounting standards for the presentation of financial statements and disclosures relating to income taxes, deferred taxes, and uncertain tax positions. It discusses requirements for balance sheet and income statement presentation of tax accounts and notes, including valuation allowances, offsetting, contingencies, and more. Disclosure requirements covered include reconciliation of uncertain tax benefits, income tax contingencies, and SEC-specific requirements for contractual obligation tables, interim reporting, and Management Discussion and Analysis sections.
The document provides guidance on accounting standards for the presentation of financial statements and disclosures relating to income taxes, deferred taxes, and uncertain tax positions. It discusses requirements for balance sheet and income statement presentation of tax accounts and notes, including valuation allowances, offsetting, contingencies, and more. Disclosure requirements covered include reconciliation of uncertain tax benefits, income tax contingencies, and SEC-specific requirements for contractual obligation tables, interim reporting, and Management Discussion and Analysis sections.
The document provides guidance on accounting standards for the presentation of financial statements and disclosures relating to income taxes, deferred taxes, and uncertain tax positions. It discusses requirements for balance sheet and income statement presentation of tax accounts and notes, including valuation allowances, offsetting, contingencies, and more. Disclosure requirements covered include reconciliation of uncertain tax benefits, income tax contingencies, and SEC-specific requirements for contractual obligation tables, interim reporting, and Management Discussion and Analysis sections.
The document provides guidance on accounting standards for the presentation of financial statements and disclosures relating to income taxes, deferred taxes, and uncertain tax positions. It discusses requirements for balance sheet and income statement presentation of tax accounts and notes, including valuation allowances, offsetting, contingencies, and more. Disclosure requirements covered include reconciliation of uncertain tax benefits, income tax contingencies, and SEC-specific requirements for contractual obligation tables, interim reporting, and Management Discussion and Analysis sections.
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Financial statement
presentation & disclosure
Chapter summary revised June
2015 ASC 740 not only provides guidance on the calculation of income tax expense, but also includes requirements for the presentation in the financial statements of the tax provision, uncertain tax positions, and deferred tax assets and liabilities.
Chapter summary revised June
2015 In addition to the information provided on the face of the financial statements, certain disclosures must be made according to the standard.
Balance sheet presentation of
deferred taxes revised June 2015 Principles of balance sheet classification revised June 2015 Guidance can now be found in FSP 16 Valuation allowance and balance sheet classification revised June Guidance can now be found in FSP 16.3.2 and FSP Example 16-1.
Balance sheet presentation of
deferred taxes revised June 2015 Offsetting and multiple jurisdictions revised June 2015 Guidance can now be in FSP 16.3.3 and FSP Question 16-1. Contingencies and uncertain tax positions revised June 2015 Guidance can now be found in FSP 16.7.
Balance sheet disclosures revised
June 2015 Guidance can now be found in FSP 16.
Income statement presentation
revised June 2015 Guidance can now be found in FSP sections 16.516.5.1. Deferred tax expense or benefit revised June 2015 Guidance can now be found in FSP sections 16.516.5.1. Interest and penalties revised June 2015 Guidance can now be found in FSP
Income statement presentation
revised June 2015 Interest and penalties revised June 2015 Guidance can now be found in FSP 16.5.2. Professional fees revised June 2015 Guidance can now be in found in FSP 16.5.3.
Income statement presentation
revised June 2015 Change in tax laws, rates, or status revised June 2015 Guidance can now be found in FSP 16.5.4 and FSP Example 16-3. Income taxes and net income attributable to non-controlling interests revised June 2015 Guidance can now be found in FSP 16.5.5 and FSP Example 16-4.
Income statement disclosures
revised June 2015 Guidance can now be found in FSP 16.
Disclosures for uncertain tax
positions revised June 2015 Annual disclosures revised June 2015 Guidance can now be found in FSP 16.7.2 16.7.4. Disclosure of accounting policy on classification of interest and penalties revised June 2015 Guidance can now be found in FSP 16.5.2.
Disclosures for uncertain tax
positions revised June 2015 Total amount of interest and penalties recognized in the statement of operations and total amount of interest and penalties recognized in the statement of financial position revised June 2015 Guidance can now be found in FSP 16.5.2. Reasonably possible significant changes in unrecognized tax benefits that may occur within the next 12 months revised June 2015 Guidance can now be found in FSP 16.7.3.
Disclosures for uncertain tax
positions revised June 2015 Tax years still subject to examination by a major tax jurisdiction revised June 2015 Guidance can now be found in FSP 16.7.6. Tabular reconciliation of unrecognized tax benefits revised June 2015.
Comprehensive basis revised June 2015
Guidance can now be found in FSP 16.7.4.
Disclosures for uncertain tax
positions revised June 2015 Disclosure of gross unrecognized tax benefits revised June 2015 Guidance can now be found in FSP 16.7.4.6 and FSP Example 16-10. Interest and penalties revised June 2015 Guidance can now be found in FSP 16.7.4.6.
Disclosures for uncertain tax
positions revised June 2015 Treatment of deposits revised June 2015 Guidance can now be found in FSP 16.7.4.6. Required information revised June 2015 Guidance can now be found in FSP 16.7.4.
Disclosures for uncertain tax
positions revised June 2015 The gross amounts of increases and decreases in unrecognized tax benefits as a result of tax positions taken during a prior period revised June 2015 Guidance can now be found in 16.7.4.1.
Disclosures for uncertain tax
positions revised June 2015 Increases and decreases in unrecognized tax benefits recorded for positions taken during the year revised June 2015 Guidance can now be found in FSP 16.7.4.2 and FSP Question 16-5.
Disclosures for uncertain tax
positions revised June 2015 The amounts of decreases in the unrecognized tax benefits relating to settlements with taxing authorities revised June 2015 Guidance can now be found in FSP 16.7.4.3 and FSP Example 16-6.
Disclosures for uncertain tax
positions revised June 2015 Reductions to unrecognized tax benefits resulting from a lapse of the applicable statute of limitations revised June 2015 Guidance can now be found in FSP 16.7.4.4 Unrecognized tax benefits that, if recognized, would affect the effective tax rate revised June 2015 Guidance can now be found in FSP 16.7.5.
Income tax related disclosures for stock
compensation revised June 2015 Guidance can now be found in FSP 15.4.6.
Significant risks & uncertainties
disclosure revised June 2015 Guidance can now be found in FSP 16.8.4.
SEC disclosures revised June
2015 SEC disclosures that are required in SEC filings but are outside of the financial statements, and are most applicable to a broad range of reporting entities.
SEC disclosures revised June
2015 Additional footnote disclosures revised June 2015 Guidance can now be found in FSP 16.6.4.
SEC disclosures revised June
2015 Contractual obligations table The SEC concluded that, in accordance with SEC Regulation S-K Item 303(a)(5), liabilities for unrecognized tax benefits should be considered when a registrant prepares the contractual obligations table.
SEC disclosures revised June
2015 Contractual obligations table There are various formats that those disclosures might follow. Deciding which of the various formats should be used is a matter of professional judgment.
SEC disclosures revised June
2015 Contractual obligations table However, the ultimate goal of the disclosures is to provide transparent information that enables investors to understand the impact of uncertain tax positions on the companys liquidity
SEC disclosures revised June
2015 Contractual obligations table If a company can make reliable estimates about the periods in which cash outflows relating to its liabilities are expected to occur, it should include those estimates in the relevant columns of the contractual obligations table.
SEC disclosures revised June
2015 Contractual obligations table For instance, any liabilities classified as a current liability in the companys balance sheet should be presented in the Less than 1 Year column of the contractual obligations table.
SEC disclosures revised June
2015 Contractual obligations table If, however, a company cannot make reliable estimates of the cash flows by period, the company should consider alternative methods of conveying relevant information to investors.
SEC disclosures revised June
2015 Contractual obligations table For instance, the company might consider including its liabilities in an all other column in the table (with a transparent note disclosure). Alternatively, the company might rely on a note disclosure alone (including quantitative information).
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) Companies are required to disclose in quarterly reports any material changes to contractual obligations that occur outside the ordinary course of business.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) The method by which any material changes are disclosed is a matter of professional judgment.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) A company should evaluate whether the inclusion of liabilities for unrecognized tax benefits in its disclosures of contractual obligations represents a material change to its prior disclosures.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) If including the liabilities does, in fact, represent a material change, the company should use judgment to determine the appropriate means of conveying this information to investors.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) The SECs management discussion and analysis (MD&A) rules do not specifically require companies to include the contractual obligations table in quarterly reports.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) However, the inclusion of an updated table is one way to effectively disclose material changes.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) Another method provides in the contractual obligations disclosures a discussion of the impact of the liabilities.
SEC disclosures revised June
2015 Interim reporting (form 10-Q filings) As noted above, the ultimate goal of the disclosures is to provide transparent information that enables investors to understand the impact of uncertain tax positions on the companys liquidity.
SEC disclosures revised June
2015 Schedule II requirement In addition to the disclosure requirements mentioned, S-X Rule 5-04 requires that valuation allowance details be provided on Schedule II, as prescribed in Rule 12-09.
SEC disclosures revised June
2015 Schedule II requirement If the information required by Schedule II is otherwise provided in the financial statements or notes, the schedule can be omitted.
SEC disclosures revised June
2015 MD&A disclosures SEC registrants must also make certain disclosures related to income taxes in the MD&A of SEC filings.
SEC disclosures revised June
2015 Effective tax rate In their MD&A, registrants should explain the reasons for significant changes in the effective income tax rate from year to year and the effect that income tax payments would have on liquidity and capital resources.
SEC disclosures revised June
2015 Effective tax rate In addition, qualitative disclosures related to an entitys effective tax rate should be carefully considered in each period.
SEC disclosures revised June
2015 Effective tax rate For example, absent commentary to the contrary, a reader of the financial statements should be entitled to assume that an entitys effective tax rate for the most recent periods will continue into the near-term future.
SEC disclosures revised June
2015 Effective tax rate If items impacting the effective rate in the current period will not recur in such a way that the expected tax rate will be substantially different going forward, MD&A disclosure of the one-time items is required.
SEC disclosures revised June
2015 Effective tax rate This will be the case regardless of whether the items are significant enough to require separate disclosure in the effective tax rate reconciliation.
SEC disclosures revised June
2015 Accounting estimates & contingencies In December 2003, the SEC issued FRR 72 to remind companies of existing SEC guidance and to provide additional guidance, interpretation, and requirements related to MD&A disclosures, as specified in Items 303 of Regulations S-K and S-B.
SEC disclosures revised June
2015 Accounting estimates & contingencies However, FRR 72 does not amend existing disclosure requirements and it provides interpretive guidance on three focused areas, one being critical accounting estimates. Although not
SEC disclosures revised June
2015 Accounting estimates & contingencies specifically stated, we believe that this includes tax contingencies.
SEC disclosures revised June
2015 Accounting estimates & contingencies The interpretation provides that the MD&A should, among other things, supplement the description of estimates already provided in the accounting policy section of the notes to the financial statements.
SEC disclosures revised June
2015 Accounting estimates & contingencies Including such factors as how the entity arrived at the estimate, how accurate the estimate/assumption has been, how much the estimate/assumption has changed from the past, and whether the estimate/ assumption is reasonably likely to change in the future.
SEC disclosures revised June
2015 Realization of deferred tax assets The SEC requires certain disclosures with respect to deferred tax assets in certain circumstances. The following is a transcript of comments made by the SEC at the AICPA Conference on Current SEC Developments on January 12, 1993:
SEC disclosures revised June
2015 Realization of deferred tax assets The SEC staff would insist that a registrant provide additional disclosures regarding the realization of its deferred tax asset in those situations in which the deferred tax asset comprises a significant portion of the registrants total assets, cont.
SEC disclosures revised June
2015 Realization of deferred tax assets Cont... and/or stockholders equity and it is not apparent that the registrants existing level of income would be sufficient to realize the deferred tax asset.
SEC disclosures revised June
2015 Realization of deferred tax assets If realization of a material deferred tax asset will require material improvements in profitability, or material changes in trends, or material changes in the relationship between reported pretax income, cont.
SEC disclosures revised June
2015 Realization of deferred tax assets Cont. and federal taxable income, or material asset sales or similar non-routine transactions, the staff believes that a discussion in MD&A of these factors is necessary.
SEC disclosures revised June
2015 Realization of deferred tax assets The staff believes that the registrant should provide sufficient disclosures in MD&A to inform the reader as to what factors and assumptions led management to arrive at its conclusion that the deferred tax asset would be realized in the future.
SEC disclosures revised June
2015 The staff recommended that the following disclosures be provided in MD&A: 1. A discussion of the minimum amount of future taxable income that would have to be generated to realize the deferred tax asset and whether the existing levels of pretax earnings for financial reporting purposes are sufficient to generate that minimum amount of future taxable income.
SEC disclosures revised June
2015 If not sufficient, a discussion of the extent of the future increase in profitability that is necessary to realize the deferred tax asset, quantified to the extent possible, and the significant assumptions relied upon by management in concluding that it is more-likelythan-not that the results of future operations will generate sufficient taxable income to realize the deferred tax asset.
SEC disclosures revised June
2015 For example, anticipated improvements in profitability resulting from improved gross margins, additional store openings, cost reduction programs, and corporate restructurings.
SEC disclosures revised June
2015 2. The historical relationship between pretax earnings for financial reporting purposes and taxable income for income tax purposes, including a discussion of the nature and amount of material differences between such amounts.
SEC disclosures revised June
2015 A table reconciling pretax income to taxable income for each of the years for which financial statements are presented has been used to accomplish this objective.
SEC disclosures revised June
2015 3. A discussion of tax-planning strategies that would be available to generate future taxable income if the registrant were unable to generate sufficient future taxable income from ordinary and recurring operations.
SEC disclosures revised June
2015 4. The annual amounts of net operating loss carryforwards for income tax purposes that expire by year.
SEC disclosures revised June
2015 At the 1994 Conference, the staff added that disclosures regarding significant deferred tax assets arising from deductible temporary differences such as OPEBs should include the expected timing of reversal of those temporary differences.
SEC disclosures revised June
2015 The staff recognized that estimates may be required since there are no actual expiration dates for the deductible temporary differences and that less precise disclosures would need to be accepted in certain circumstances.
SEC disclosures revised June
2015 For example, disclosures regarding significant deferred tax assets arising from deductible temporary differences might provide annual reversals by year of significant deductible temporary differences that give rise to deferred tax assets for the first five years, followed by groupings for subsequent five-year periods.
Exemptions for nonpublic entities
revised June 2015 Guidance can now be found in FSP 16.9.
07-12-07 Samaan V Zernik (SC087400) at The Los Angeles Superior Court - Court Reporter's Transcript of Pretense Ex Parte Proceeding at The Court of Judge Lisa Hart-Cole