FASB #96
Under FASB #96:
- This was a significant change related to deferred taxes.
- The balance sheet or liability approach was adopted. This means the liability/asset values were determined. The tax expense (I/S) amount became the “plug” figure, i.e., used to balance the tax accrual entry.
- If everything goes according to plan and no tax law changes occur there will be little difference between the APB #11 and FASB #96 tax accrual entries. But, this is not usually the case as we can see from a continuation of our example: