EssayQuestionsChapter9 - McKeith and Collins Financial Accounting Reporting 2nd edition Essay Questions Chapter 7 1 In connection with IAS 12 Income

EssayQuestionsChapter9 - McKeith and Collins Financial...

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McKeith and Collins, Financial Accounting & Reporting, 2 nd edition Essay Questions Chapter 7 1. In connection with IAS 12 Income Taxes, deferred taxation must be fully provided for on all temporary differences. Explain what is meant by “temporary differences” and what problems can arise with a full provisioning approach. 2. The deferral method of providing for deferred tax is said to place the emphasis on the statement of comprehensive income charge whereas the liability method is said to place the emphasis on the statement of financial position. Explain what is meant by the deferral and liability methods of providing for deferred tax and why each method places its own unique emphasis. 3. Draft a memorandum to your client, a non-accountant, outlining what deferred tax is and why there are problems in recommending the appropriate accounting treatment. 4. In order for a user of financial statements to fully assess the performance of a company, the tax charge in the statement of comprehensive income must bear a relationship to its reported income. Discuss the impact of deferred tax on reported income and whether its continued use is justifiable. 5. Partial provisioning for deferred tax addresses all the problems associated with full provisioning. Discuss. Key: Level I = Easy Level II = Intermediate Level III = Difficult
McKeith and Collins, Financial Accounting & Reporting, 2 nd edition Essay Questions with solutions 1. In connection with IAS 12 Income Taxes, deferred taxation must be fully provided for on all temporary differences. Explain what is meant by “temporary differences” and what problems can arise with a full provisioning approach. Basic answer Temporary differences – difference between the tax base of an asset or liability and its carrying amount in the statement of financial position. Tax base – the amount attributed to the asset or liability for tax purposes.

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