A Roadmap to Accounting for Income Taxes - Deloitte

1 A Roadmap to Accounting for Income Taxes2017 The FASB Accounting Standards Codification material is copyrighted by the Financial Accounting Foundation, 401 Merritt 7, PO Box 5116, Norwalk, CT 06856-5116, and is reproduced with publication contains general information only and Deloitte is not, by means of this publication, rendering Accounting , business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services, nor should it be used as a basis for any decision or action that may affect your business.

2 Before making any decision or taking any action that may affect your business, you should consult a qualified professional advisor. Deloitte shall not be responsible for any loss sustained by any person who relies on this used in this document, Deloitte means Deloitte & Touche LLP, a subsidiary of Deloitte LLP. Please see for a detailed description of our legal structure. Certain services may not be available to attest clients under the rules and regulations of public 2017 Deloitte Development LLC. All rights Publications in Deloitte s Roadmap SeriesRoadmaps are available on these topics.

3 asset Acquisitions (2017)Common-Control Transactions (2016)Consolidation Identifying a Controlling Financial Interest (2017)Contracts on an Entity s Own Equity (2017)Discontinued Operations (2017)Distinguishing Liabilities From Equity (2017)Foreign Currency Transactions and Translations (2017)Non-GAAP Financial Measures (2017)Noncontrolling Interests (2017)The Preparation of the Statement of Cash Flows (2017)Pushdown Accounting (2016)Revenue Recognition (2017)Segment Reporting (2017)Share-Based Payment Awards (2017)Roadmaps on these topics will be available soon:LeasesContentsPreface xviAcknowledgments xviiContacts xviExecutive Summary xviiiChapter 1 Overview Overview of ASC 740 Objectives of ASC 740 4 Chapter 2 Scope Taxes Within the

4 Scope of ASC 740 Hybrid Taxes Accounting for Taxes Assessed on the Payor of a Dividend Accounting for Taxes Withheld on Certain Payments ( , Dividend, Interest, Royalty, or License)* Refundable Tax Credits Income Tax Indemnifications Upon Sale of a Subsidiary That Previously Filed a Separate Tax Return 12 Chapter 3 Recognition and Derecognition 14 General Recognition Approach Exceptions to Recognition of Deferred Taxes Definition of Subsidiary and Corporate Joint Venture* Definition of Foreign and Domestic Investments Definition of Inside and Outside Basis Differences Recognition of Deferred Taxes for Inside Basis Differences Deferred Tax Considerations Related to Withholding Taxes Imposed on Distributions From Disregarded Entities

5 And Foreign Subsidiaries Recognition of Deferred Taxes for Temporary Differences Related to the CTA Hedge of a Net Investment in a Foreign Subsidiary Deferred Taxes Recorded Through the Currency Translation Adjustment Whether a Change in Management s Plans for Reinvestment or Repatriation of Foreign Earnings Is a Recognized or Nonrecognized Subsequent Event 25* Items that are new or have been significantly amended since the previous Tax Consequences of a Change in Intent Regarding Remittance of Pre-1993 Undistributed Earnings Tax Consequences of Bad-Debt Reserves of Thrift Institutions Tax Consequences of a Reduction of the Tax Base-Year Bad-Debt Reserve in an Annual Period Tax Consequences of a Reduction of the Tax Base-Year Bad-Debt Reserve in an Interim Period Realization of a DTA of a Savings and Loan Association.

6 Reversal of a Thrift s Base-Year Tax Bad-Debt Reserve Regulated Entities Subject to ASC 980* Construction in Progress and Plant in Service Recorded Net-of-Tax* Intra-Entity Transactions Between Different Tax-Paying Components Subsequent Changes in Tax Rates Involving Intra-Entity Transactions Indexing of the Tax Basis of Assets and Liabilities 33 Tax Positions Consideration of Tax Positions Under ASC 740 Considerations of Tax Positions by Tax-Exempt or Pass-Through Entities Unrecognized Tax Benefits and Spin-Off Transactions Accounting for the Tax Effects of Tax Positions Expected to Be Taken in an Amended Tax Return or Refund Claim or to Be Self-Reported Upon Examination Recognition and Measurement Assumptions to Be Used Decision Tree for Recognizing Benefits of a Tax Position Legal Tax Opinions Not Required to Support a Tax Position Meaning of the Court of Last Resort and Its Impact on Recognition Impact of the Likelihood of the Supreme Court s Hearing the Case Consideration of Widely Understood Administrative Practices and Precedents Applying ASC 740 to Questions About Economic Nexus Lookback Period for

7 Accruing a State Income Tax Liability for UTBs Determining the Unit of Account Whether Determination of the Unit of Account Is an Accounting Policy Choice Applying the Unit of Account Decision Tree for the Subsequent Recognition, Derecognition, and Measurement of Benefits of a Tax Position Evaluating the Recognition Threshold After Examination of a Tax Year Effectively Settled Tax Positions Finality or Certainty of Outcome in Subsequent Recognition, Derecognition, or Measurement of a Tax Position New Information Obtained After the Balance Sheet Date Concerning Uncertain Tax Positions Interim Accounting for a Change in Judgment Changes in Judgment Regarding a Tax Position Taken in the Current Year Changes in Judgment Regarding a Tax Position Taken in the Prior Year Distinguishing a Change in Estimate From a Correction of an Error Deferred Tax Consequences of UTBs 55 Temporary Differences Tax Bases Used in the Computation of Temporary Differences Temporary Differences 60ivContents Income Tax Consequences of

8 Issuing Debt With a Conversion Feature Accounted for Separately as a Derivative Income Tax Effects on Medicare Part D Subsidy Receipts Recognizing Deferred Taxes for Indefinite-Lived Assets Deferred Tax Considerations When Goodwill Becomes a Finite-Lived asset Deferred Tax Consequences of Synthetic Leases Considering the Impact of Tax Method Changes When to Recognize the Impact of Tax Method Changes Accounting for Foreign Branch Operations Deferred Income Taxes Related to a Foreign Branch: Accounting for Changes in a Parent s Deferred Taxes Due to Changes in Exchange Rates 74 Basis Differences That Are Not Temporary Differences Permanent Differences Examples of Basis Differences That Are Not Temporary Differences 78 Change in Tax Status Change in Tax Status of an Entity Tax Effects of a Check-the-Box Election Recognition Date for Conversion to a REIT Loss of Nontaxable Status as a Result of acquisition Successor Entity s Accounting for the Recognition of Income Taxes When the Predecessor Entity Is Nontaxable Accounting for the Elimination of Income

9 Taxes Allocated to a Predecessor Entity When the Successor Entity Is Nontaxable Voluntary Change in Tax Status of an Acquired Entity Change in Tax Status as a Result of a Common-Control Merger Change in Tax Status to Taxable: Accounting for an Increase in Tax Basis Built-in Gain: Recognition and Measurement 89 Tax Holidays Tax Consequences of Tax Holidays Accounting for Temporary Differences Related to Investment Tax Credits* 92 Effect of Anticipated Future Special Deductions, Losses, and Tax Credits 96 Alternative Minimum Tax 97 Investment Tax Credits 98 Changes in Laws or Rates Retroactive Changes in Tax Laws or Rates and Expiring Provisions That May Be Reenacted Enacted Changes in Tax Laws or Rates That Affect Items Recognized in OCI Reporting Tax Effects of a Change in Tax Law in Discontinued Operations 100 Acquired Temporary Differences in Certain Purchase Transactions That Are Not Accounted for as Business Combinations 101 Interest and Penalties Recognition and Measurement of Interest and Penalties Interest Income on UTBs Capitalization of

10 Interest Expense Recognition of the Accrual for Penalties 105vContents Chapter 4 Measurement 106 General Measurement Approach Measuring Deferred Taxes in Consolidated Financial Statements When a Foreign Subsidiary Uses a Local Statutory Basis of Accounting to Prepare Its Financial Statements 108 Applicable Tax Rate Used to Measure Deferred Taxes Tax Rate Used in Measuring Operating Losses and Tax Credits Determining the A