Pretax book income is the financial-reporting starting point before related income-tax expense or benefit. Match the amount to the reporting entity, period, jurisdictional analysis, and statement category. Consolidated pretax income cannot be compared blindly with one legal entity's return.
Control the starting amount
ASC 740-10-50-10A requires the stated domestic and foreign disaggregation of continuing-operations income or loss before tax under its current transition terms. That disclosure need reinforces the provision's scope control.
If the final continuing-operations ledger reports $1,000,000 before tax, begin the book-tax bridge there. Do not use net income after tax, include a gain in other comprehensive income (OCI), or subtract a discontinued-operation loss unless the task defines that broader scope. Reconcile domestic and foreign components before rate analysis. The book amount is controlled by the financial statements; tax-law adjustments enter later rows and must retain their own evidence.
The controlled total should agree with the signed financial-statement workpaper before any tax adjustment is entered.
Put the concept to work
Apply this concept
- Use pretax book income as the controlled starting point for a book-tax bridge while preserving scope, entity, period, and statement category.
Learning resources
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