8/3/16

Question 1

An employer’s obligation for postretirement health benefits that are expected to be provided to or for an employee must be fully accrued by the date the:

Answer 1

Employee is fully eligible for benefits. Accrual should begin when employee is hired through the eligibility (vesting) date.

Question 2

Define attribution period.

Answer 2

The period of an employee’s service to which the expected postretirement benefit obligation for that employee is assigned. The end of the “attribution period” is the “full eligibility date.”

Question 3

Employees’ compensation for future absences (mostly vacation) should be accrued if:

Answer 3

1. Services have already been rendered, and
2. The obligation relates to vested or accumulated rights, and
3. The amount can be reasonably estimated, and
4. Payment is probable.

Question 4

What should be accrued for compensated absences?

Answer 4

Accrued compensated absences generally includes “vacation pay” but not “sick pay.” Sick pay usually does not vest.

Question 5

How should compensation expense associated with a deferred compensation arrangement be record?

Answer 5

If the terms attribute all or a portion of expected future benefits to a period of service greater than one year, the cost of benefits should be recognized over that required period of service.

Question 6

Under current GAAP, which approach is used to determine income tax expense?

Answer 6

Asset and liability approach (balance sheet approach). Used to squeeze out the amount of income tax expense after the amount of deferred tax assets and liabilities have been determined.

Question 7

How should deferred income taxes for temporary differences be classified on the balance sheet?

Answer 7

Deferred tax liabilities are classified in the balance sheet based on the classification of the related assets. For example, if the related asset is a noncurrent asset the deferred tax liability will be classified as a noncurrent liability.

Question 8

Under IFRS, how are deferred tax assets and deferred tax liabilities reported?

Answer 8

As noncurrent on the balance sheet. They may be netted if the entity has a legally enforceable right to offset current tax assets against current tax liabilities and the deferred tax assets and deferred tax liabilities relate to income taxes levied by the same tax authorities.

Question 9

How should deferred income taxes for temporary differences be presented on the balance sheet?

Answer 9

All current deferred tax liabilities and assets must be offset and presented as one amount. Same for noncurrent.

Question 10

Defined deferred tax epense

Answer 10

It is equal to the current period temporary difference times the enacted future tax rate.

Question 11

What is a deferred tax liability and asset?

Answer 11

Deferred tax liability - future taxable amount

Deferred tax asset - future deductible amount