ASC 740 is a GAAP codification that allows for deferring income taxes under special circumstances such...

ASC 740 is a GAAP codification that allows for deferring income taxes under special circumstances such as the advanced tickets sales for the International Speedway Corporation. This ASC 740 provision was designed to provide for accurate match of revenues to expenses. A number of companies now offer expert advice for corporations to defend their position for justifying the use of this GAAP codification, given that the IRS may question the practice for a particular company. In your opinion, would it be ethical to simply report income on earnings from ticket sales for an event that has not yet occurred? Why or why not?

Expert Solution

ASC 740 states GAAP codification that allows for deferring income taxes under special circumstances such as the advanced tickets sales for the International Speedway Corporation.

The provision is to match revenue to expenses in an accurate manner.

However corporations are using this provision as a tool to simply report income on earnings from ticket sales for an event that has not yet occurred.

Reasons for the validity of the statement stated above are as under:

As per ASC 740-10 a tax position is first evaluated for recognition based on its technical merits.Tax positions that meet a recognition criterion are then measured to determine an amount to recognize in the financial statements.That measurement incorporates information about potential settlements with taxing authorities.

Hence it is clearly evident from above that corporations who are reporting income from ticket sales for an event that has not yet occurred is within the aura of ASC 740.

We conclude that it is ethical on corporation as long as they comply with the requirement of the standard.

ekkarill92 answered 1 year ago

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ASC 740 is a GAAP codification that allows for deferring income taxes under special circumstances such...

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