What is permanently reinvested earnings?

Defined as an accounting concept, permanently reinvested earnings are foreign earnings reinvested in the company outside the United States for longer-term operations; no income tax accrues for this amount. Foreign cash is simply foreign earnings held as operational cash by the foreign entity.

Under what circumstances would a company record a deferred tax asset related to its outside basis in the stock of a foreign subsidiary?

A deferred tax asset (DTA) for a tax-over-book outside basis in a domestic or foreign subsidiary may be recorded only if it is expected to reverse in the foreseeable future. Foreseeable future is generally viewed a period not to exceed one year.

What is ASC 740 tax?

Accounting for income taxes (ASC 740) is a set of income tax standards requiring public companies to analyze and disclose income tax risks. Complying with ASC 740 is challenging for public companies due to the knowledge and experience needed to meet the significant tax and financial reporting requirements.

What are outside basis differences?

A subsidiary’s basis in its assets and liabilities is referred to as “inside basis.” A parent’s basis in the stock of its subsidiary is considered “outside basis.” An outside basis difference is the difference between a parent’s tax basis in the stock of the subsidiary and the book basis in its investment.

Is impairment a permanent tax difference?

In situations in which goodwill is not deductible for tax purposes (component-2 book goodwill), a goodwill impairment or amortization would have no corresponding tax effect and results in a permanent difference.

Is goodwill impairment a permanent difference?

No deferred taxes are recorded when nondeductible goodwill is acquired. A permanent difference results when the goodwill is impaired (if held by a publicly traded company) or amortized (if held by a privately held company) for book purposes.

Is ASC 740 a GAAP?

Subtopic 740-10 applies to GAAP-basis financial statements, be they audited, reviewed, or compiled financial statements.

Can outside basis be negative?

Additionally, a partner’s contributions of cash or property increase his capital account. Conversely, a partnership’s distribution of cash or property to the partner decreases his capital account. A partner may have a negative capital account. However, a partner may never have a negative outside basis.

Do distributions in excess of basis increase basis?

Stock basis is adjusted annually, as of the last day of the S corporation year, in the following order: Increased for income items and excess depletion; Decreased for distributions; Decreased for non-deductible, non-capital expenses and depletion; and.

Can you reverse impairment loss?

Reversal of impairment loss You can reverse an impairment loss only when there is a change in the estimates used to determine the asset’s recoverable amount. It means that you cannot reverse an impairment loss due to passage of time or unwinding the discount.

Does impairment affect net income?

An impairment loss makes it into the “total operating expenses” section of an income statement and, thus, decreases corporate net income.