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Chapter 12 - Solution Manual

I clarification that the term substantively enacted

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i. Clarification that the term ‘substantively enacted’ as it relates to income tax legislation means that future events required by the enactment process historically have not affected the outcome and are unlikely to do so. j. A change to the requirements relating to the tax effects of distributions to shareholders. An entity would measure current and deferred tax assets and liabilities using the rate expected to apply when the tax asset or liability is realized or settled, including the effect of the entity’s expectations of future distributions. k. Adoption of the FASB ASC requirements for the allocation of income tax expense to the components of comprehensive income and equity. In particular, some changes in tax effects that were initially recognized outside continuing operations would be recognized in continuing operations. l. The classification of deferred tax assets and liabilities as either current or non-current on the basis of the financial reporting classification of the related non-tax asset or liability. m. A clarification that indicates the classification of interest and penalties is an accounting policy choice and hence must be applied consistently, and introduction of a requirement to disclose the chosen policy. Financial Analysis Case Answers will vary depending on the company selected. CHAPTER 13 Case 13-1 a. There is not enough information presented in the case to determine earnings, but the effect of the leasing alternatives on earnings can be determined. Dagger capitalizes the lease, causing the following earnings effects:
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