SFAS No.109 rejected the approach of its predecessor SFAS No.96 regarding the classification of deferred tax assets and liabilities on the balance sheet.SFAS No.96 required that the deferred tax consequences of temporary differences that will result in taxable or deductible amounts during the following year or operating cycle (if longer than one year)be classified as current.SFAS No.109 requires that deferred tax assets and liabilities be classified based on the asset or liability to which the temporary difference relates or,if no clear relationship between the temporary difference and an asset or liability can be established,based on the date on which the deferred tax item will be realized or settled.
Required:
Explain why the FASB rejected the approach in SFAS No.96 and the basis for the method required in SFAS No.109.

Question

Quizplus · Accepted Answer

The Answer of SFAS No.109 rejected the approach of its predecessor SFAS No.96 regarding the classification of deferred tax assets and liabilities on the balance sheet.SFAS No.96 required that the deferred tax consequences of temporary differences that will result in taxable or deductible amounts during the following year or operating cycle (if longer than one year)be classified as current.SFAS No.109 requires that deferred tax assets and liabilities be classified based on the asset or liability to which the temporary difference relates or,if no clear relationship between the temporary difference and an asset or liability can be established,based on the date on which the deferred tax item will be realized or settled.
Required:
Explain why the FASB rejected the approach in SFAS No.96 and the basis for the method required in SFAS No.109.

SFAS No109 Rejected the Approach of Its Predecessor SFAS No