Which of the Following Statements Best Describes the ASC 740

question 119

Multiple Choice

Which of the following statements best describes the ASC 740 rules related to the disclosure of the components of deferred tax assets and liabilities in the company's income tax note?

• A)A publicly traded company should disclose the approximate "tax effect" (dollar amounts)of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
• B)A publicly traded company should disclose the approximate "tax effect" (dollar amounts)of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.
• C)A privately held company should disclose the approximate "tax effect" (dollar amounts)of all of the components of its deferred tax assets and liabilities in a footnote to the financial statements.
• D)A privately held company should disclose the approximate "tax effect" (dollar amounts)of only those components of its deferred tax assets and liabilities that give rise to a "significant" portion of net deferred tax liabilities and deferred tax assets in a footnote to the financial statements.

---

Definitions:

Unrecognized Compensation

Compensation earned but not yet provided for in the financial statements, often due to vesting requirements.

Convertible Securities

Financial instruments, such as bonds or preferred shares, that can be converted into a specified number of common shares of the issuing company.

Diluted Earnings

Represents the earnings per share (EPS) if all convertible securities were converted into common stock.

Dilutive

Referring to a financial action or arrangement, such as the issuance of new shares, that decreases an existing shareholder's percentage of ownership.