This free, guided checker walks your finance team through the key decision points for ASC 740 Uncertain Tax Positions (ASC 740-10). Answer a few questions to see the likely treatment and the evidence to document.
Answer a few quick questions below. It is private - nothing is submitted or stored - and takes about a minute.
This tool is a high-level US GAAP screening aid for general information only and is not accounting, audit or legal advice. Conclusions require entity-specific evidence and judgement - confirm the treatment with your advisor.
Here is what the checker asks and why each step matters. Prefer to talk it through? Contact us and we will help directly.
Screen every filed or expected income tax position - deductions, credits, deferrals, transfer pricing, and nexus positions - for whether a taxing authority could disallow all or part of the benefit on examination. Weigh the strength of the technical support: statutes, regulations, rulings, and case law directly on point. The common trap is treating a position as certain because it has never been challenged; absence of examination is not evidence that the position would be sustained.
Routine or highly certain position; the full benefit clears the recognition threshold and is recognized as filed (ASC 740-10-25-6).
Official guidance: FASB Accounting Standards Codification
The unit of account is the level at which a position is evaluated - individual or grouped - and it should reflect how the entity prepares its return and how the taxing authority is expected to examine the position. Fix the unit of account before testing recognition so a weak position is not offset against a strong one. Taxes not based on income, such as sales, payroll, or property tax, fall outside ASC 740 and follow other guidance such as ASC 450 or ASC 720-30.
The item is not an income tax within ASC 740; account for it under the applicable standard rather than the uncertain-tax-position model (ASC 740-10-15-2 through 15-4).
Official guidance: FASB Accounting Standards Codification
Test recognition on the technical merits alone, presuming the position will be examined by an authority that has full knowledge of all relevant information and that the dispute is resolved by the court of last resort. Detection risk - the chance the position is never audited - is disregarded. Weigh only authoritative support such as statutes, regulations, rulings, and case law; a position that is merely reasonable or not frivolous does not clear the more-likely-than-not threshold.
Use the interactive tool above to see how this applies to your situation.
Official guidance: FASB Accounting Standards Codification
Build a cumulative probability table of possible settlement outcomes; the measured benefit is the largest amount whose cumulative likelihood of realization exceeds 50 percent.
Recognize the largest amount more likely than not of being realized and record a liability for the unrecognized portion (ASC 740-10-30-7).
Official guidance: FASB Accounting Standards Codification
A change in judgment must result from new information, not a new evaluation of the same information, and its effect is recognized in the period of change.
Remeasure or derecognize the position in the period the new information arises (ASC 740-10-35-2). Recognize the full benefit and continue to reassess the position each reporting period (ASC 740-10-35-2).
Official guidance: FASB Accounting Standards Codification
A previously unrecognized benefit is recognized in the first period in which the threshold is met, the position is effectively settled, or the statute of limitations expires.
Recognize the benefit in the period of effective settlement or statute expiration (ASC 740-10-25-8 through 25-10). Recognize no benefit; record the full liability for the unrecognized tax benefit with interest and penalties (ASC 740-10-25-6; 25-56 through 25-57).
Official guidance: FASB Accounting Standards Codification
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