S taxing jurisdiction is not involved in that case

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computing deferred taxes, except in situations where the U.S. taxing jurisdiction is not involved. In that case, companies should use iGAAP which is based on enacted rates or substantially enacted tax rates. Finally, the issue of allocation of deferred income taxes to equity for certain transactions under iGAAP must be addressed in order to conform to U.S. GAAP, which allocates the effects to income. At the time of this printing, deliberations on the Income Tax project have been suspended indefinitely. The FASB has no plans to issue an amendment to its literature at this time, but it may revisit this project after the IASB further develops its replacement to IAS 12 .
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EXERCISE 19-19 (a) (All figures are in millions.) Temporary Difference Rate Resulting Deferred Tax Related Balance Sheet Account Classification (Asset) Liability $90 million estimated costs per books 40% $(36) Estimated Payable Current $50 million excess depreciation per tax 40% $20 Plant Assets Noncurrent Totals $(36 ) $20 (b) Current assets Deferred tax asset .................................................................................. $36,000,000 Long-term liabilities Deferred tax liability ............................................................................. $20,000,000 (c) Income before income taxes ............................................. $95,000,000 2 Income tax expense Current ................................................................... $64,000,000 1 Deferred ................................................................. (26,000,000 ) 3 38,000,000 4 Net income ....................................................................... $57,000,000 1 Taxable income for 2010 ............................................................................... $160,000,000 Enacted tax rate .............................................................................................. 40% Income tax payable for 2010 .......................................................................... $ 64,000,000 2 $10,000,000 ÷ 40% = $25,000,000 cumulative taxable temporary difference at the beginning of 2010. Cumulative taxable temporary difference at the end of 2010 ....................................................................................... $50,000,000 Cumulative taxable temporary difference at the beginning of 2010 ............................................................................. 25,000,000 Taxable temporary difference originating during 2010 ................................................................................................. $25,000,000
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Cumulative deductible temporary difference at the end of 2010 ....................................................................................... $90,000,000 Cumulative deductible temporary difference at the beginning of 2010 ............................................................................. 0 Deductible temporary difference originating during 2010 ................................................................................................. $90,000,000 Pretax financial income for 2010 ................................................................. $ X Taxable temporary difference originating .................................................... (25,000,000) Deductible temporary difference originating ............................................... 90,000,000 Taxable income for 2010 ............................................................................. $160,000,000 Solving for X: X – $25,000,000 + $90,000,000 = $160,000,000 X = $95,000,000 = Pretax financial income 3 Deferred tax liability at the end of 2010 ...................................................... $ 20,000,000 Deferred tax liability at the beginning of 2010 ............................................ 10,000,000 Deferred tax expense for 2010 (increase in deferred tax liability) ................................................................................ $ 10,000,000 Deferred tax asset at the end of 2010 ........................................................... $ 36,000,000 Deferred tax asset at the beginning of 2010 ................................................. 0 Deferred tax benefit for 2010 (increase in deferred tax asset) .................................................................................... (36,000,000) Deferred tax expense for 2010 ..................................................................... 10,000,000 Net deferred tax benefit for 2010 ................................................................. $(26,000,000 ) 4 Net deferred tax benefit for 2010 ................................................................ $(26,000,000) Current tax expense for 2010 (Income tax payable) .................................... 64,000,000 Income tax expense for 2010 ....................................................................... $ 38,000,000
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EXERCISE 19-20 (a) Income Tax Expense .......................................................................... 156,000 Deferred Tax Asset ............................................................................. 51,000 Income Tax Payable ................................................................. 187,000 Deferred Tax Liability .............................................................. 20,000 Future Years 2011 2012 2013 Total
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  • Fall '08
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  • Balance Sheet, ........., Generally Accepted Accounting Principles

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