When negotiating a stock sale transaction, you are stepping into the shoes of the selling party when it comes to reporting deferred income tax (benefit) items on the closing balance sheet. One little secret of the accounting profession you need to keep in mind is that the deferred income tax provision is not an exact calculation; judgment and materiality are factors that come into play, affecting the overall calculation. For example, many auditors apply materiality or, where applicable, indemnity clause provisions to avoid recording contingent liability for deferred income taxes under ASC 740-10 (formerly FIN 48 and FAS 109).
Therefore, …read more
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