Which of the Following Statements Best Describes the ASC 740

question 55

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 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:

Performance Criteria

Standards or benchmarks used to evaluate the effectiveness or success of a task, process, or individual’s performance.

Sole Focus

The main or only point of concentration or attention on a specific matter or activity.

Future of the Relationship

Possible outcomes and directions in which a relationship might develop over time.

Level of Trust

The degree of confidence one party has in another's motives, actions, and statements in a relationship or situation.