300669 liability method 3D Flashcards
Under current generally accepted accounting principles, which approach is used to determine income tax expense?
Periodic expense approach
Asset and liability approach
“With and without” approach
Net of tax approach
Question #300669
Asset and liability approach
The FASB determines income tax expense by requiring an asset and liability approach to the expense. This method recognizes that tax expense is the result of current-year activities and preceding-year activities. This method focuses on the calculation of and change in deferred tax assets and liabilities, current income tax payable, and valuation allowances, and calculates the periodic expense or benefit as the change in the asset or liability from the prior balance sheet date. Note that all deferred tax assets and liabilities are classified as long term on the balance sheet.
2341.02
Accounting for income taxes under FASB rules is based on the “liability method.” Under the liability method, accounting for income taxes has two primary objectives—to recognize the amount of taxes currently payable or refundable and to recognize deferred tax liabilities and assets for the future tax consequences of temporary differences.
FASB ASC 740-10-10-1