Chris Green, CPA, is auditing Rayne Co.’s 2007 financial statements. For the year ended December 31, 2007, Rayne is applying Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes.” Rayne’s controller, Dunn, has prepared a schedule of all differences between financial statement and income tax return income. Dunn believes that as a result of pending legislation, the enacted tax rate at December 31, 2007 will be increased for 2008. Dunn is uncertain which differences to include and which rates to apply in computing deferred taxes under FASB 109. Dunn has requested an overview of FASB 109 from Green.
Required
Prepare a brief memo to Dunn from Green that identifies the objectives of accounting for income taxes, defines temporary differences, explains how to measure deferred tax assets and liabilities, and explains how to measure deferred income tax expense or benefit.