Week 4 Discussion

Week 4 Discussion - Taxable income in prior carryback...

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The objectives of accounting for income taxes are to recognize (a) the amount of taxes payable or refundable for the current year and (b) deferred tax liabilities and assets for the future tax consequences of events that have been recognized in an enterprise's financial statements or tax returns. (FASB Statement No. 109) One thing you need to make sure before you can have a valuation allowance is the company would have to have a future in the business. Once you establish that the taxable income has a sufficient future then you will look to see if it is available under tax laws. The following sources of taxable income may be available under the tax law to realize a portion or all of a tax benefit for deductible temporary differences and carry forwards: Future reversals of existing taxable temporary differences
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Unformatted text preview: Taxable income in prior carryback year(s) if carryback is permitted under the tax law Tax planning strategies Future taxable income exclusive of reversing temporary differences and carryforwards ( 2009 McGladrey & Pullen, LLP) Also if the company has a loss then the future event cannot be reported on the financial statement till it has occurred. However, because many firms complained that it was unfair to require them to report deferred tax liabilities but not allow them to report deferred tax assets, the FASB reconsidered and revised it position. Statement No. 109 explicitly allows a firm to consider potential future income in evaluating the realizability of deferred tax assets. (Stice, Stice, Skousen)...
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This note was uploaded on 05/29/2011 for the course EC 2011 taught by Professor Johnson during the Spring '11 term at FIT.

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