Okay, so i was talking to a colleague a few months ago — a prominent academic tax person — and we were talking pensions and deferred taxes. We got it sorted out (he helped me greatly) but then he said something about my making up a fake income tax expense. HUH? Fake, I ask? No way. Apparently, my sin is treating OCI items as though they have income tax expense associated with them.

Why would this tax person say that I was making it up (after all, OCI items are NET of tax). Little known to me (after all of these years) is that income tax expense in the footnote of financials is the income tax expense only on the income statement. But the deferred tax composition (the details of DTL’s and DTA’s) includes all deferred tax items, even those that are related to OCI stuff (because of course, OCI items have deferred tax implications).

This tax person basically wants to net all OCI items and ignore the fact the netting is b/c of income tax expense (arguably, OCI related income tax expense). That’s fine, but then we need to do net-accounting for all income statement items too, which we don’t.

So I’ll still stick with my approach to talking about income tax expense as pertaining to income statement stuff versus comprehensive income stuff (to keep the “story” simple for income taxes — not that it’s simple for most people to begin with!). And that tax person can stick with their “net way” of thinking about OCI items. This is bookkeeping in a way. Do it whatever you want to.

BUT my question is (and my search doesn’t reveal anything) why does the footnote present total income tax expense that way? Why not TOTAL TOTAL? I cannot find the answer in 109 nor with conversations with others.