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FASB Offers Guidance On Accounting For Tax Act Provisions

Tammy Whitehouse | November 16, 2004

The Financial Accounting Standards Board said recently it would issue staff positions to offer guidance on how companies should account for certain tax benefits recently extended to U.S. manufacturers in the latest tax law.

The American Jobs Creation Act of 2004 provides domestic manufacturers a tax deduction of up to 9 percent on certain portions of income as defined in the law. FASB says companies should account for this deduction as a special deduction, not a reduction in the statutory tax rate.

FASB favored the special deduction because any benefit from the deduction would be reported in the year it is earned. If companies reported the tax benefit by reducing the tax rate, it would require an immediate adjustment of deferred tax balances at a different rate, which would create a one-time benefit or loss for earnings.

The new tax law also gives...

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