As part of its uncertain tax position assessment, Madison Corporation records interest and penalties related to its unrecognized tax benefits of $1,000,000. Which of the following statements about recording this amount is most correct?

Question

Quizplus · Accepted Answer

Madison has the option to include the interest and penalties related to unrecognized tax benefits as part of its income tax provision or record the expense separately. However, the company must disclose which option it chooses in its financial statements. This is in accordance with ASC 740-10-25-51, which states that a company can choose to record the interest and penalties separately or as part of its income tax provision, as long as it discloses the choice made. Madison is not required to wait until the expense is paid to record it.

As Part of Its Uncertain Tax Position Assessment, Madison Corporation