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SIERRA BANCORP AND SUBSIDIARY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Continued)
66
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
Income Taxes
The Company files its income taxes on a consolidated basis with its subsidiary. The allocation of income
tax expense represents each entity’s proportionate share of the consolidated provision for income taxes.
Income tax expense is the total of the current year income tax due or refundable and the change in deferred
tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the
temporary differences between carrying amounts and tax basis of assets and liabilities, computed using
enacted tax rates. A valuation allowance, if needed, reduces deferred tax assets to the amount expected to
be realized.
A tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be
sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is
the largest amount of tax benefit that is greater than 50% likely to be realized on examination. For tax
positions not meeting the “more likely than not” test, no tax benefit is recorded. We have determined that
as of December 31, 2015 all tax positions taken to date are highly certain and, accordingly, no accounting
adjustment has been made to the financial statements.
The Company recognizes interest and penalties related to uncertain tax positions as part of income tax
expense.
Salary Continuation Agreements and Directors’ Retirement Plan
The Company has entered into agreements to provide members of the Board of Directors and certain key
executives, or their designated beneficiaries, with annual benefits for up to fifteen years after retirement or
death. The Company accrues for these future benefits from the effective date of the plan until the director’s
or executive’s expected retirement date in a systematic and rational manner. At the consolidated balance
sheet date, the amount of accrued benefits equals the then present value of the benefits expected to be
provided to the director or employee, any beneficiaries, and covered dependents in exchange for the
director’s or employee’s services to that date.
Comprehensive Income
Comprehensive income consists of net income and other comprehensive income. Other comprehensive
income includes unrealized gains and losses on securities available for sale, net of an adjustment for the
effects of realized gains and losses and any applicable tax. Comprehensive income is a more inclusive
financial reporting methodology that includes disclosure of other comprehensive income that historically
has not been recognized in the calculation of net income. Unrealized gains and losses on the Company’s
available for sale securities are included in other comprehensive income after adjusting for the effects of
realized gains and losses. Total comprehensive income and the components of accumulated other
comprehensive income (loss) are presented in the consolidated statements of comprehensive income.