Tax Accounting

Short Description: 
Situations where valuations can result in tax accounting differences include asset impairment, stock acquisitions, goodwill impairment, and derivatives.

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, stock acquisitions, goodwill impairment, and derivatives.