2 American Institute of Accountants Committee on Accounting Procedure

2 american institute of accountants committee on

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2 . American Institute of Accountants, Committee on Accounting Procedure, “Accounting for Income Taxes,” Accounting Research Bulletin No. 23 (New York: AIA, 1944). 3 . Committee on Accounting Procedure, “Restatement and Revision of Accounting Research Bulletins,” Accounting Research Bulletin No. 43 (New York: AIA, 1953). 4 . Ibid., sec. B, para. 4. 5 . Ibid., sec. B, para. 1. 6 . Accounting Principles Board, Opinion No. 11 , “Accounting for Income Taxes” (New York: AICPA, 1967).
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7 . Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 96, “Accounting for Income Taxes” (Stamford, CT: FASB, 1987). 8 . Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 109 , “Accounting for Income Taxes” (Stamford, CT: FASB, 1992). 9 . Corporations are entitled to a special deduction from gross income for dividends received from a domestic corporation. This deduction is generally 70 percent of dividends received from corporations owned less than 20 percent by the recipient corporation. 10 . SFAS No. 109 described these temporary differences in paragraph 11 (see FASB ASC 740-10-25- 20). 11 . The modified accelerated cost recovery system (MACRS) is the only allowable accelerated depreciation method allowed under the IRC. It usually results in relatively higher depreciation amounts than straight-line depreciation in the early years of an asset's life. 12 . SFAS No. 109 , para. 3 (see FASB ASC 740-10-25-19). 13 . These temporary differences were also described in SFAS No. 109 , para. 11 (see FASB ASC 740- 10-25-20). 14 . The investment tax credit is used to stimulate the economy. It has been phased in and out of the IRC, depending on the state of the economy, since the early 1960s. 15 . Financial Accounting Standards Board, Statement of Financial Accounting Standards No. 52 , “Foreign Currency Translation” (Stamford, CT: FASB, 1981). 16 . SFAS No. 52 (see FASB ASC 830-10-20) defines the functional currency as the currency of the primary economic environment in which an entity operates. See Chapter 15 for a discussion of foreign currency translation. 17 . Under the purchase method of accounting for business combinations now termed the acquisitions method, which is now the only acceptable method of accounting for business combinations, the assets and liabilities acquired are recorded at their fair market values, not their previous book values. See Chapter 16 for a discussion of business combinations. 18 . A company may choose not to use the carry-back provisions and only carry forward net operating losses. Such an election might occur if Congress were expected to increase tax rates in the near future. 19 . APB Opinion No. 11, para. 43. 20 . Ibid. 21 . Ibid., para. 15.
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22 . APB Opinion No. 11 , paras. 34 and 35. 23 . Ibid., para. 34. 24 . FASB Statement No. 109, para. 8 (see FASB ASC 740-10-30-2). 25 . Under SFAS No. 109, there may also be a valuation allowance for deferred tax assets. Changes in the valuation allowance would also affect income tax expense. The valuation allowance is discussed later in the chapter.
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