Accounting for income taxes;"Tax reductions" in statements of income: the use of certain procedures suggested by accounting research bulletin no. 23 in statements filed with the Securities and Exchange Commission;

              Accounting Research BULLETINS
December, 1944
No. 23
Issued by the Committee on Accounting Procedure, American Institute of Accountants, East 41st Street, New York 17, N. Y. Copyright 1944 by American Institute of Accountants
Accounting for Income Taxes
THIS bulletin deals with a number of accounting problems which arise currently in the reporting of income and excess-profits taxes (hereinafter referred to as "income taxes") in financial statements. The problems arise largely where (a) material items entering into the computation of taxable income are not reflected in the income state-ment and (b) material items included in the income statement are not reflected in the computation of taxable income. The bulletin does not purport to cover the entire subject of the treatment of these taxes in such statements.
SUMMARY STATEMENT
(1) Income taxes are an expense which should be allocated, when necessary and practicable, to income and other accounts, as other ex-penses are allocated.
(2) Where an item resulting in a material increase in income taxes is credited to surplus, the portion of the current provision for income taxes which is attributable to such item should be applied in reduc-tion of the credit to surplus and taken up as a credit in the income statement, specifically disclosed and appropriately described, either as a deduction from the aggregate current provision for income taxes or as a separate credit.
(3) Where an item resulting in a material reduction in income taxes is charged to surplus, the amount of the reduction should be applied against the charge to surplus and included as a charge in the income statement, specifically disclosed and appropriately described, either as an increase in the provision for income tax allocated to income included in the income statement, or as a portion of the item in question equal to the tax reduction resulting therefrom.
(4) Where an item resulting in a material reduction in income taxes is charged to or carried forward in a deferred-charge account,
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