Which of the Following Statements Best Describes the ASC 740

question 115

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 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 its tax position will be sustained on its merits (recognition).
• C)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.
• D)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.

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Definitions:

Contingency

A future event or circumstance that is possible but cannot be predicted with certainty, often accounted for in financial planning.

Remote

Referring to work, operations, or processes conducted away from a central office or location, often facilitated by digital communication technology.

Contingent Liability

A potential financial obligation that may arise in the future, dependent on the outcome of a specific event.

Reasonably Estimable

A term used in accounting to describe a cost or liability that can be accurately predicted or projected.