Exception for certain recurring items
(A) In general
(A)In general#
Notwithstanding paragraph (1) an item shall be treated as incurred during any taxable year if—
(i) the all events test with respect to such item is met during such taxable year (determined without regard to paragraph (1)),
(ii) economic performance with respect to such item occurs within the shorter of— (I) a reasonable period after the close of such taxable year, or (II) 8½ months after the close of such taxable year,
(iii) such item is recurring in nature and the taxpayer consistently treats items of such kind as incurred in the taxable year in which the requirements of clause (i) are met, and
(iv) either— (I) such item is not a material item, or (II) the accrual of such item in the taxable year in which the requirements of clause (i) are met results in a more proper match against income than accruing such item in the taxable year in which economic performance occurs.
(A)(i)#
the all events test with respect to such item is met during such taxable year (determined without regard to paragraph (1)),
(A)(ii)#
economic performance with respect to such item occurs within the shorter of—
(I) a reasonable period after the close of such taxable year, or
(II) 8½ months after the close of such taxable year,
(B)Financial statements considered under subparagraph (A)(iv)#
In making a determination under subparagraph (A)(iv), the treatment of such item on financial statements shall be taken into account.
(C)Paragraph not to apply to workers compensation and tort liabilities#
This paragraph shall not apply to any item described in subparagraph (C) of paragraph (2).