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Accounting for Income Taxes: Questions and Answers APB Opinion No. 28, Interim Financial Reporting ISSUE

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Abstract

The Omnibus Budget Reconciliation Act of 1993 (the Act) increased the top corporate tax rate from 34 percent to 35 percent effective retroactive to January 1, 1993. Paragraph 27 of Statement 109 requires that deferred tax liabilities and assets be adjusted for the effect of a change in tax laws or rates and that the effect be included in income from continuing operations. The issue is how to determine the tax effect of a retroactive change in enacted tax rates that is included in income from continuing operations for the period that includes the enactment date of the retroactive change. EITF DISCUSSION The Task Force reached a consensus that the tax effect of a retroactive change in enacted tax rates on current and deferred tax assets and liabilities should be determined at the date of Copyright © 1993, Financial Accounting Standards Board Not for redistribution Page 1enactment, August 10, 1993, using temporary differences and currently taxable income existing as of the date of enactment. The cumulative tax effect is included in income from continuing operations. The Task Force also reached a consensus that the reported tax effect of items not included in income from continuing operations (for example, discontinued operations, extraordinary items, cumulative effects of changes in accounting principles, and items charged or credited directly to shareholders ' equity) that arose during the current fiscal year and prior to the date of enactment should be measured based on the enacted rate at the time the transaction was recognized for financial reporting purposes. The tax effect of a retroactive change in enacted tax rates on current or deferred tax assets and liabilities related to those items is included in income from continuing operations in the period of enactment

Topics: Copyright © 1993, Financial Accounting Standards Board
Year: 1993
OAI identifier: oai:CiteSeerX.psu:10.1.1.353.4567
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