Income Taxes - Future Income Taxes Method

This Section establishes standards for the recognition, measurement, presentation, and disclosure of income and refundable taxes in an enterprise’s financial statements. However, it does not apply to accounting for investment tax credits (see Section 3805).

An enterprise must make an accounting policy choice to account for income taxes using either:

1. The taxes payable method
2. The future income taxes method

The fundamental principle upon which the future income taxes method is based is that an enterprise recognizes a future income tax liability whenever recovery or settlement of the carrying amount of an asset or liability results in future income tax outflows. Similarly, an enterprise recognizes a future income tax asset whenever recovery or settlement of the carrying amount of an asset or liability would generate future income tax reductions.

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