ASC 740 applies a two-step process in determining if an uncertain tax benefit should be recognized.
Recognition and measurement are the two steps.

Question

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ASC 740 requires a two-step process for recognizing and measuring uncertain tax benefits. The first step involves recognition, where the entity evaluates the tax position in question and determines whether it is more likely than not to be sustained upon examination by relevant tax authorities. The second step involves measurement, where the entity determines the amount of the benefit that should be recognized based on the best estimate of the amount that is ultimately expected to be realized.

ASC 740 Applies a Two-Step Process in Determining If an Uncertain