04-18-12 Class26 Ch 20 Pensions

Income statement presentation income statement

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Unformatted text preview: t 2 0 10 $ 2 0 0 ,0 0 0 Allo wanc e f o r d e f e r r e d tax De f e r r e d tax as s e t, ne t Chapter 18-10 ( 3 0 ,0 0 0 ) 17 0 ,0 0 0 LO 4 Explain the purpose of a deferred tax asset valuation allowance. Income Statement Presentation Income Statement Presentation Formula to Compute Income Tax Expense (for GAAP) Illustration 19-20 Income tax payable or + refundable - Change in deferred income tax = Income tax expense or benefit In the income statement or in the notes to the financial statements, a company should disclose the significant components of income tax expense (current and deferred). Chapter 18-11 LO 5 Describe the presentation of income tax expense in the income statement. Accounting for Net Operating Losses Accounting for Net Operating Losses Net operating loss (NOL) = tax­deductible expenses exceed taxable revenues. The federal tax laws permit taxpayers to use the losses of one year to offset the profits of other years (carryback and carryforward). Chapter 18-12 LO 8 Apply accounting procedures for a loss carryback and a loss carryforward. Accounting for Net Operating Losses Accounting for Net Operating Losses Loss Carryback Back 2 years and forward 20 years Losses must be applied to earliest year first Illustration 19-29 Chapter 18-13 LO 8 Apply accounting procedures for a loss carryback and a loss carryforward. Accounting for Net Operating Losses Accounting for Net Operating Losses Loss Carryforward May elect to forgo loss carryback and Carryforward losses 20 years Illustration 19-30 Chapter 18-14 LO 8 Apply accounting procedures for a loss carryback and a loss carryforward. Review of the Asset-Liability Method Review of the Asset-Liability Method Companies apply the following basic principles: (1) Recognize a current tax liability or asset for the estimated taxes payable or refundable. (2) Recognize a deferred tax liability or asset for the estimated future tax effects attributable to temporary differences and carryforwards using enacted tax rate. (3) Base the measurement of current and deferred taxes on provisions of the enacted tax law. (4) Reduce the measurement of deferred tax assets, if necessary, by the amount of any tax benefits that, companies do not expect to realize. Chapter 18-15 LO 10 Indicate the basic principles of the ass...
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