Chapter 10 Discussion Solutions
10-7. The FASB undertook the codification project in order to: (1) Simplify user access by codifying all authoritative U.S. GAAP in one spot; (2) Ensure that the codified content accurately represents authoritative U.S. GAAP; and (3) Create a codification research system that is up-to-date for the released results of standard-setting activity.
10-19. Tax holidays are discussed in 740-10-S50, 740-10-S99, 323-740-10-S99 (Intersection Topic) and 740-10-25.
10-20. ASC 740-10-25-5 et seq. requires that a more-likely-than-not criterion be applied to a tax position. More likely than not means a likelihood of more than 50 percent based on the technical merits, that the position will be sustained upon examination. The terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. This is the recognition standard set forth in previously in FIN48.
10-25. The two step process for recognition and measurement of deferred tax assets and liabilities is presented in 740-10-55-3:
The application of the requirements of this Subtopic related to tax positions requires a two-step process that separates recognition from measurement. The first step is determining whether a tax position has met the recognition threshold; the second step is measuring a tax position that meets the recognition threshold. The recognition threshold is met when the taxpayer (the reporting entity) concludes that, consistent with paragraphs 740-10-25-6 through 25-7 and 740-10-25-13, it is more likely than not that the taxpayer will sustain the benefit taken or expected to be taken in the tax return in a dispute with taxing authorities if the taxpayer takes the dispute to the court of last resort.
Once the position has met the recognition criteria of more-likely-than-not, the second step requires the measurement of the item using current tax law and rates. The benefit of the tax position shall initially and subsequently be measured as the largest amount of
10-19. Tax holidays are discussed in 740-10-S50, 740-10-S99, 323-740-10-S99 (Intersection Topic) and 740-10-25.
10-20. ASC 740-10-25-5 et seq. requires that a more-likely-than-not criterion be applied to a tax position. More likely than not means a likelihood of more than 50 percent based on the technical merits, that the position will be sustained upon examination. The terms examined and upon examination also include resolution of the related appeals or litigation processes, if any. This is the recognition standard set forth in previously in FIN48.
10-25. The two step process for recognition and measurement of deferred tax assets and liabilities is presented in 740-10-55-3:
The application of the requirements of this Subtopic related to tax positions requires a two-step process that separates recognition from measurement. The first step is determining whether a tax position has met the recognition threshold; the second step is measuring a tax position that meets the recognition threshold. The recognition threshold is met when the taxpayer (the reporting entity) concludes that, consistent with paragraphs 740-10-25-6 through 25-7 and 740-10-25-13, it is more likely than not that the taxpayer will sustain the benefit taken or expected to be taken in the tax return in a dispute with taxing authorities if the taxpayer takes the dispute to the court of last resort.
Once the position has met the recognition criteria of more-likely-than-not, the second step requires the measurement of the item using current tax law and rates. The benefit of the tax position shall initially and subsequently be measured as the largest amount of