There are two types of accountants in this world: Those who gravitate toward taxes, and the rest of us! Accounting for income taxes under ASC 740 is one of the more complex accounting standards, and while there have been some changes in the past few years, there haven’t been any grand changes in the guidance. However, ASC 740 consistently ranks in the top 10 for our most viewed blog posts. Why? Because, while it’s not new, it is complex.

Are you trying to get up-to-speed on accounting for income taxes? Look no further! This blog post will compile some of our favorite places to turn to for guidance, examples, training, and more!

FASB Guidance

It’s always a good idea when researching an accounting topic to start at the beginning. In this case, when dealing with ASC Topic 740, that means turning straight to the codification. Anytime we develop a new course, this is always our starting point. You can access the codification here by using the basic view for free (or for a fee, you can access the professional subscription view).

Interested in seeing the latest updates to ASC 740? Here’s a list of the changes the FASB has made to the accounting for income taxes in the last 5 years:

• ASU 2018-05 – Income Taxes (Topic 740): Amendments to SEC Paragraphs Pursuant to SEC Staff Accounting Bulletin 118 (SEC Update)
• ASU 2016-16 – Income Taxes (Topic 740): Intra-Entity Transfers of Assets other than Inventory
• ASU 2015-17 – Income Taxes (Topic 740): Balance Sheet Classification of Deferred Taxes

 Big Four Resources

While the accounting literature is always the best place to start, it isn’t always easy to understand. Although we always start by reading through the FASB’s guidance, when we need to better understand it in more “plain English” or want to see some examples of how that guidance might be applied in practice, our next step is to turn to the accounting guides published by the big four firms.

Most of these guides will regurgitate the guidance found within the codification, offer the interpretation of the professional practice department at each firm, and then, most importantly, offer application insight and practical examples. Why should you collect all four? Because, sometimes, the accounting isn’t clear. And when the guidance isn’t clear, the firms can take different approaches or views to their interpretation. Depending on your ultimate accounting goals, the positions taken in these guides can be good ammunition to have to help support your position.

You can find each of the big four firms’ guides here:

1. PwC’s Accounting Guide, Income Taxes – At 500 pages, this guide is mostly text-based with minimal visual illustrations to walk you through the guidance. However, it is full of practical examples and Q&A-style questions.
2. EY’s Financial Reporting Developments, Income Taxes – You must create an account on EY’s Accounting Link to be able to view the material, however, at 634 pages, it is a bit more robust than the PwC guide with plenty of examples. The extensive menu makes it easy to find and navigate to exactly the knowledge you need.
3. Deloitte’s A Roadmap to Accounting for Income Taxes – With 737 pages, this document is the longest of the series and also contains a nice comparison between U.S. GAAP and IFRS.
4. KPMG’s Accounting for Income Taxes Handbook – While I would usually say the KPMG Handbooks are my favorite resource, this one was written before the Handbooks for the new standards and, therefore, lacks the visual elements (i.e. diagrams, flowcharts, and tables) of the newer handbooks. Regardless, at 732 pages, it is still quite thorough and full of great examples.

Online Learning Solutions

Looking for content that will put you, the learner, in the driver’s seat? Want to be able to watch videos, see examples, and apply what you’ve learned through interactive case studies that ask you to choose the correct accounting treatment? If so, our eLearning solutions on the Revolution are for you! We currently offer the following three (3) CPE-eligible courses on the Revolution:

1. Overview of ASC Topic 740 – Income taxes can be a confusing topic! This module walks through the equation of an income tax provision and covers the required disclosures for financial statements.
2. Deferred Tax and Valuation Allowance – Understanding the accounting for income taxes has many interesting nuances! In this module, you'll dive into a five-step methodology for accounting for deferred taxes. After you learn about each step, you'll walk through a case study so you can apply what you have just learned!
3. Uncertainty in Income Taxes – Is tax law black and white? No, definitely not! There’s lots of gray area in tax law causing companies to take positions that may, or may not, be sustained if reviewed by taxing authorities. This uncertainty in income taxes has an impact on the financial statements as well as the tax return. ASC 740, Income Taxes, provides guidance on how to account for this uncertainty in the financial statements. In this course we will explore the identification of, and accounting for, uncertainty in income taxes using the guidance in ASC 740.

GAAPology Blog Posts

Or maybe, you just want a short, sweet, plain-English explanation of some of the key topics in ASC 740? Or maybe you want a little more insight into what keeps auditors and accountants up at night as it relates to accounting for income taxes? Our blog posts cover it all!  Check out some of our most popular blogs on accounting for income taxes below, and don’t forget to subscribe to our blog, so you don’t miss out on future posts!

1. Accounting for Income Taxes Under ASC 740: An Overview
2. Accounting for Income Taxes Under ASC 740: Deferred Taxes
3. Example: Accounting for Uncertain Tax Positions (ASC 740)
4. What Readers of The Financial Statements Need to Know about The TCJA! 

Searching for more?

We are always on the lookout for great topics to cover in our next course, blog, or class discussion. Not seeing what you’re looking for? Let us know in the comments and we’ll work it into future content!

Disclaimer  

This post is published to spread the love of GAAP and provided for informational purposes only. Although we are CPAs and have made every effort to ensure the factual accuracy of the post as of the date it was published, we are not responsible for your ultimate compliance with accounting or auditing standards and you agree not to hold us responsible for such. In addition, we take no responsibility for updating old posts, but may do so from time to time.