ASC 740-270-30 prescribes an estimated annual effective tax rate (AETR) approach for calculating a tax provision for interim periods, with certain exceptions. However, in some cases regulated utilities estimate the income tax provision in interim periods using a discrete method. Prior to the Codification, the FASB addressed this practice in FASB Interpretation No. 18, Accounting for Income Taxes in Interim Periods — an interpretation of APB Opinion No. 28 (FIN 18).

Because no further guidance has been issued on this matter, the continued use of the discrete method by regulated utilities applying ASC 980 is acceptable. However, a change to this method by reporting entities that already apply the AETR approach would not be a preferable change in accounting. There are exceptional circumstances in which a regulated utility should exclude a jurisdiction from applying the AETR (e.g., when a reliable estimate of ordinary income cannot be made). Such circumstances are unusual and judgment is required. See TX 17 for further information on calculating income taxes for interim periods.