What Is ASC 740?
Short answer
ASC 740 is the accounting standard that governs how companies calculate and report income taxes in their financial statements — covering current and deferred tax expense, deferred tax assets and liabilities, and valuation allowances, commonly referred to as the "tax provision."
Last reviewed June 1, 2026
What the provision includes
The ASC 740 provision reconciles the tax a company reports for financial statement purposes with what it actually owes (or has paid) to tax authorities. It has two main components: current tax expense (the tax owed for the current period) and deferred tax expense (the future tax impact of timing differences between book and tax accounting, such as depreciation or stock compensation).
Why it comes up for growing companies
Companies preparing for their first audited financial statements — often ahead of a financing round — frequently build their first real ASC 740 provision under time pressure. Auditors scrutinize valuation allowance judgments (whether a company expects to actually use its deferred tax assets) closely, which is often where provision preparation slows down.
How VPTax helps
VPTax’s Tax Provision (ASC 740) service prepares the provision and related disclosures and works directly with a company’s auditors to resolve questions, using the same team that already handles the company’s income tax compliance.