The Missing Tax Accounting Guide: A Plain English Introduction to ASC 740 Tax Provisions

"This guide is well written and easy to follow.... It really is the missing link." This book explains the “how” and “why” of tax accounting concepts and mechanics according to ASC 740 (U.S. GAAP) using clear, practical, and understandable language and methods. It also contains a series of tax provision examples that start with a trial balance, work through tax provision calculations, and develop the necessary accounting entries to close the books. Finally, this book explains how all these steps ultimately come together to support the tax-related figures and explanations in a company’s financial statements and footnotes. Start by diving into an example of how a tax provision works. Understand the relationship between the tax return (“compliance”) and the tax provision (“tax accounting”). Learn what makes up a company’s total tax expense (or provision), how to compute it, and the relationship between the tax provision and a company’s financial statements. Learn about book/tax differences, permanent differences, and temporary differences, what these concepts mean, and how to calculate them. Learn what gives rise to deferred tax expenses, deferred tax benefits, deferred tax assets, and deferred tax liabilities, as well as how to account for them in tax provision calculations. Gain insight into a financial statement auditor’s perspective of the tax provision and how to interact with them effectively. Learn how to handle state income taxes in tax provision calculations with permanent and temporary differences, as well as how to present state income taxes in the ETR reconciliation. Reinforce and deepen your understanding of these and other concepts by referring to detailed examples, workpaper illustrations, and sample journal entries. This book is the “missing guide” you have been looking for and contains the foundational knowledge necessary to learn, understand, and apply the complex rules of ASC 740 in the real world.