SFAS 109 requires the following procedure.

Question

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SFAS 109 requires the computation of deferred tax assets and liabilities based on temporary differences, which arise when the tax basis of an asset or liability differs from its financial reporting basis. This is the primary focus of the standard and a key aspect of financial reporting for income taxes. Computation of deferred income tax based on permanent differences (B) is not required by SFAS 109, as these differences do not give rise to deferred tax assets or liabilities. Computation of income tax expense based on taxable income (C) is a basic requirement of accounting for income taxes but does not involve deferred taxes. Computation of deferred income tax based on both temporary and permanent differences (D) is not required by SFAS 109.

SFAS 109 Requires the Following Procedure