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Companies are required to calculate book to tax basis differences for all asset and liability accounts. Companies must assume that all assets are sold for their book amounts and all liabilities are paid equal to their book amounts. A tax liability must be accounted for if the difference between book and tax basis results in taxable income. A tax benefit must be accounted for if the difference between book and tax basis results in a taxable loss or an increased deduction. Situations where valuations can result in tax accounting differences include asset impairment (SFAS 144), stock acquisitions under SFAS 141, goodwill impairment (SFAS 142), and derivatives (SFAS 133).
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