Seven principles to consider when preparing a tax provision for subsidiary or carve-out financial statements

June 2008


While not all-inclusive, this paper explains several key principles, which, if kept in mind, will enable preparers to manage a carve-out tax provision process more smoothly.
Understand the purpose of the carve-out financial statements and the corresponding pre-tax accounting

  1. The separate return method is the preferred method
  2. Other methods may be acceptable
  3. Differences between the tax allocation method and the tax sharing agreement should be reflected in equity
  4. The use of hindsight is prohibited
  5. FIN 48 applies to the carve-out entity
  6. Transparent disclosures should be provided

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