Use tax rates contained in enacted law and expected to apply in the supported periods of payment, recovery, settlement, or attribute use. A proposed bill, announced policy, or management expectation is not an enacted rate. When rates vary by year, preserve the reversal schedule instead of using an unsupported blend.
Match rate to reversal period
ASC 740-10-30-8 sets the objective of measuring deferred tax balances with enacted rates expected to apply when the related amounts become taxable or deductible.
Suppose $120,000 of a taxable difference reverses when the enacted rate is 25 percent and $180,000 reverses after an enacted reduction to 21 percent. The liability is $30,000 plus $37,800, or $67,800. Applying 21 percent to all $300,000 would ignore the supplied calendar. The workpaper must retain jurisdiction, character, enactment date, effective dates, and rate source. It does not interpret legislation or forecast when an unsupported difference will reverse.
Put the concept to work
Apply this concept
- Select the supplied enacted rate for each current or reversal period and reject proposed or merely expected legislation from measurement.
Learning resources
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