You are engaged to perform a compilation of XYZ, Inc.s financial statements for the year ended December 31, 2019. The financial statements of XYZ, Inc. are prepared using the income tax basis of accounting and will include a full set of footnotes. The major differences between the income tax basis of accounting and the use of U. S. generally accepting accounting principles with respect to XYZ, Inc. include accounting for investments and depreciation methods. What should the accounting policy footnote describe with respect to the use of the income tax basis of accounting?

Select one:

a.

Describe that the income tax basis of accounting is a better method of accounting than U.S. generally accepted accounting principles.

b.

Describe that the income tax basis of accounting is used to prepare the financial statements and is not U.S. generally accepted accounting principles, AND indicate the major differences between the two bases of accounting; i.e., manner in which investments and depreciation are accounted.

c.

Describe only that the income tax basis of accounting is being used to prepare the financial statements.

d.

Do not include an accounting policies footnote regarding the basis of accounting.