Income Taxes in Interim Reporting
Estimated Annual Effective Tax Rate
Unlike annual reporting, interim tax expense is generally calculated using the estimated annual effective tax rate applied to year-to-date ordinary income.
The estimated tax rate may change throughout the year as expectations change. Companies update calculations each interim reporting period.
Note
Certain discrete tax items and unusual or infrequently occurring events are accounted for separately under applicable U.S. GAAP rather than through the estimated annual effective tax rate.
Summary
Interim tax accounting relies on estimated annual tax rates rather than actual quarterly tax payments.