BDO Knows: ASC 740 - October 2014
This Income Tax Accounting Question & Answer segment explains and illustrates the requirements of ASU 2013-11. The ASU principally concerns the balance sheet presentation of unrecognized tax benefits (“UTBs”), which are liabilities for income-tax-related positions which may be challenged on audit and ultimately disallowed in whole or in part. Generally, reporting entities are required to reduce a deferred tax asset (“DTA”) for a net operating loss (“NOL”), a similar tax loss (explained in Q&A 2 below), or an income tax credit carryforward (collectively referred to in this Q&A segment as a “Tax Attribute DTA”) by a UTB. However, there are important exceptions to the netting requirement, which are discussed in more detail below.