Ifrs tax footnote will not involve assessing the

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IFRS tax footnote will not involve assessing the adequacy of the allowance or the extent which changes in the allowance affect net income. 2. Under IFRS, deferred tax assets on employee stock options are computed based on tb options' intrinsic value at each reporting date. In contrast, GAAP uses historical value. This results in partial mark-to-market accounting for the IFRS deferred tax asset and introduces volatility in tax expense. We must review footnotes carefully to determine any potenti income statement impact of IFRS revalued deferred tax assets.
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Module 5 I Revenue Recognition and Operating Income 5-36 respect to the balance sheet, all deferred tax assets and liabilities are classified as long-term r IFRS. This will impact metrics and ratios that involve current assets and liabilities and affect our comparative assessment of liquidity. Finally, recall that separate reporting of extraordinary items is not permitted under IFRS. n comparing U.S. GAAP to IFRS, we include any extraordinary items with other expenses, ding to their function. ODULE-END REVIEW efer to the Merck & Co., Inc., 2010 income statement in the Mid-Module Review. equired 1. Assume that during 2010 the $US weakened with respect to the currencies in which Merck conducts its business. How would that weakening affect Merck's income statement? What is the difference between basic and diluted earnings per share? Thesolution isonpage5-60. P PEN 0 IX 5 A: Expanded Explanation of Deferred Taxes module provided an example of how different depreciation methods for tax and financial reporting create a d tax liability. That example showed that total depreciation over the life of the asset is the same under both and financial reporting, and that the only difference is the timing of the expense or tax deduction. Because iation differs each year, the amount at which the equipment is reported will differ as well for book and tax _ es (cost less accumulated depreciation is called net book value for financial reporting purposes and tax basis . purposes). These book vs tax differences are eliminated at the end of the asset's useful life. Tounderstand this concept more completely, we modify the example from the module to include a third year. e that the company purchases PPE assets at the start of Year 1 for $120. For financial reporting purposes, company uses straight-line depreciation and records depreciation of $40 each year (with zero salvage). For tax es, assume that the company takes tax depreciation deductions of $60, $50, and $10. Exhibit SA.l reports annual depreciation along with the asset's net book value and its tax basis, for each year-end. I =xHIBIT 5.4.1 - Book and Tax Depreciation and Carrying Value Deferred Deferred Tax Financial Tax Tax Liability Expense (Increase Reporting Reporting Book vs (Book vs Tax or Decrease in (Net Book (Tax Tax Difference x Tax "Deferred Tax Value) Basis) Difference Rate) Liability) -- ourchase: PPE carrying value .... $120 $120 $ 0 $ 0 1: Depreciation. , ..... , .. , ... (40) (60) - of Year 1: PPE carrying value ... 80 60 $20 $ 8 $ 8 - ($80 - $60) ($20 x 40%) ($8 - $0) [email protected]" 2: Depreciation. , . , ..........
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