Which of the Following Statements Best Describes the ASC 740

question 35

Multiple Choice

Which of the following statements best describes the ASC 740 process for evaluating a company's uncertain tax positions?

• A) ASC 740 requires a company to complete a two-step analysis every time it evaluates its uncertain tax positions.
• B) ASC 740 allows a company to take into account the probability of audit by a tax authority in step 1 (measurement) in its evaluation of its uncertain tax positions.
• C) ASC 740 allows a company to record a tax benefit from an uncertain tax position only if it is probable the benefit will be sustained on audit by a tax authority.
• D) ASC 740 requires a company to complete step 2 (measurement) in its evaluation of its uncertain tax positions only if it is more-likely-than-not that that its tax position will be sustained on its merits (recognition).

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Definitions:

Marginal Cost

This is the additional cost of producing one more unit of a good or service.

Multiple Suppliers

A sourcing strategy where a company uses various suppliers to mitigate risks and ensure a steady supply of products or components.

Bullwhip Effect

The increasing fluctuation in orders that often occurs as orders move through the supply chain.

Orders Decrease

A situation where the number of orders for products or services is reducing, potentially impacting company revenue and production planning.