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Question 1

under GAAP, which approach is used to determine ITE?

Answer 1

A + L approach

Question 2

does a DTA result in a P or L?

Answer 2

it results in a profit, unless there was a VA allowance

Question 3

how do you calc effective TR?

Answer 3

ITE / pretax income

Question 4

what items are subject to intraperiod IT allocation?

Answer 4

IDA + PUFER + AP change/AOCI

Question 5

what is the primary obj. of acct for IT’s?

Answer 5

to recognize the amt of DTL and DTA reported for future tax consequences

Question 6

what is the 2-step approach for uncertain tax positions?

Answer 6

*step 1: recog. of tax ben (would you win >50%)
… test failed = tax exp increased

*step 2: meas. of tax ben
(even if win, how much?)
…reflect amt of ult. settlement w/ IRS

Question 7

what tax rate is used for TD compared to TI?

Answer 7

TI uses the CY TR, while TD uses enacted (future years) TR

*do not get tricked into using anticipated/proposed/unsigned rates for TD

Question 8

how are changes in tax laws/rates treated?

Answer 8

treat as change in est. (prospective approach)

Question 9

how is adj’d DTL/DTA calc’d?

Answer 9

(BB TD + CY TD)
* new enacted TR
= req’d EB

= req’d adj.

…req’d adj is the DTA/DTL reported on JE

Question 10

how many years for CB and CF for NOL’s?

Answer 10

2 back and 20 forward

*NOL’s create def’d tax ben’s

Question 11

what is the JE for NOL CB?

Answer 11

*no VA allow.
Dr: tax refund receivable
Cr: tax benefit (reduction of book loss)

…IT refund receivable is the IRS tax refund

Question 12

JE for NOL CF’s?

Answer 12

*may req. VA allow.
Dr: DTA (gift cert.)
Cr: tax ben

Question 13

how is max future tax savings and DTA VA calc’d?

Answer 13

*max future tax savings =
CF bal * future rate

*DTA VA =
CF bal beyond CY * future rate

…max savings - DTA VA
= net realizable DTA

Question 14

is a DRD on TI PD or TD?

Answer 14

it is a PD for amt excluded

*taxable amt is the unexcluded portion (100-80/70%) and that will be the TD (DTL)

Question 15

what is DRD?

Answer 15

• own 0-19% = 70% exclude
• own 20-80% = 80% exclude
• own over 80% = 100% excl.

Question 16

what TR do we use for interim FS’s? (quarters)

Answer 16

we use the est’d effective TR for each quarter for the entire year

Question 17

are DTL and DTA’s netted against each other? and what TR’s are used for them?

Answer 17

• yes, same jurisdiction under IFRS too
• we use enacted TR for the year the TD is expected to reverse
• do not net if not same tax-paying comp’s (like japan w/ china)

Question 18

the tax ben. from an NOL CF that reduces current taxes payable is treated as:

Answer 18

income from cont. op’s

Question 19

what should be disclosed in a Co’s FS’s related to def’d taxes?

Answer 19

• types and amt’s of existing TD’s
• nature and amt of each type of NOL and tax credit CF

*NOT PD’s

Question 20

when does an artificial loss occur?

Answer 20

when SP < FV

• actual loss = SP - BV
• this type of loss is def’d and recog’d over life of lease (cap lease)