Income+Taxes+Lesson+_2

Income+Taxes+Lesson+_2 - IncomeTaxes Current Current Income...

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1 Income Taxes Income Taxes Current Current Income Income Taxes Taxes •Accounting income and taxable income •Calculation of taxable income •Calculation of current income taxes Income Tax Loss Income Tax Loss Carryover Benefits Carryover Benefits •Introduction to tax losses •Loss carryback illustrated •Loss carryforward illustrated •Carryforward with valuation allowance •Review of future income tax asset account Future/Deferred Future/Deferred Income Taxes Income Taxes •Tax basis •Future income tax liabilities •Future income tax assets •Income tax accounting objectives •Multiple differences illustrated •Tax rate considerations Presentation, Presentation, Disclosure, and Disclosure, and Analysis Analysis •Balance sheet presentation •Income and other statement presentation •Disclosure requirements •Analysis •Outstanding conceptual questions IFRS / IFRS / Private Private Entity GAAP Entity GAAP Comparison Comparison •Comparison chart •Looking ahead
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2 Valuation of Future Income Tax Asset Valuation of Future Income Tax Asset Income tax assets and liabilities meet the conceptual framework conditions for recognition as “asset” or “liability” Future income tax assets must be reviewed at year end to ensure they are not reported at more than recoverable amount This depends on whether taxable income will be earned in the future, against which temporary differences can be deducted
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3 Income Tax Expense Income Tax Expense = total of current tax expense (or benefit) and future tax expense (or benefit) Current income tax expense (or benefit) = income taxes payable/receivable, based on taxable income for current year Future income tax expense (or benefit) = amount of adjustment needed to the future income tax asset/liability account on the balance sheet
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4 Future Tax Rates Future Tax Rates Should use the rates that are expected to apply when the tax assets are realized or the tax liabilities are settled i.e. the enacted rate (or substantively enacted) at the balance sheet date
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5 Future Tax Rates Future Tax Rates The effect of future tax rate changes should be immediately recognized on all future tax accounts Rate changes are treated as an adjustment to the future income tax expense/benefit Accounting standards prohibit discounting of future income tax assets and liabilities IFRS requires separate disclosure of future tax expense or benefit due to a change in tax rates
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6 Future Tax Rate - example Future Tax Rate - example Hostel Corp. had the following at end of 2009: Property, plant, and equipment: Net book value (NBV) = $4,000,000 Tax value (Undepreciated capital cost, UCC) = 1,000,000 Taxable temporary difference = 3,000,000 (to reverse by $1,000,000 each year in 2011, 2012 and 2013) Tax rate 40% Future tax liability 1,200,000
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7 Future Tax Rate - example Future Tax Rate - example Assume a new income tax rate is enacted from 40% to 35%, effective January 1, 2012
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Income+Taxes+Lesson+_2 - IncomeTaxes Current Current Income...

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