Ch. 18 - taxes - principles Flashcards
tax base
you have one for PPE, tax base for Wtty liability and Pension Liability = 0
ASPE vs IFRS for B/S
For ASPE you will divide the liabilities in:
- Current Liabilities :
Deferred tax liability (within a year)
- Non-Current liability:
Deferred tax liability
For IFRS you have ONLY:
Non-Current Libility:
Deferred tax liability (the whole amount)
taxable amount
A temporary difference causes a
“Future Taxable amount” if taxable
income is greater than accounting
income when it reverses.
future deductible amount
A temporary difference creates a future
deductible amount if the taxable
income will be decreased relative to
accounting income in the year the
difference reverses.
Carrying Value and Tax basis explained
Carrying Value – the amount that
appears on the balance sheet.
Tax Basis – the amount that would
appear on a”Tax Balance Sheet” if one
were prepared for tax filing purposes
Balance Sheet Method in
Practice
1) Use I/S method to calculate taxes payable
2) Set up table to determine balance sheet
amounts
Tax basis-Carrying value=accumulated
temporary difference
Temporary difference*tax rate = B/S ending
balance
B/S ending balance-balance sheet opening
balance=adjustment to the B/S (future/deferred tax asset or liability)
3) Tax expense is the “plug”
Calculate the deferred tax liability/asset
TAX BASIS - CARRYING = temporary DIFFERENCE *TAX = Future tax asset (liability) - opening balance asset/(liability) = adjustment
500,000 – 600,000 = (100,000) (40,000) - 0 = (40,000) => is a liability
500,000 = 800,000-300,000 - carrying amount for tax purposes
600,000 = 800,000-200,000 - carrying amount for accounting purposes
(40,000) = (100,000)*40%
JE for recording Taxes Payable
dr. Income Tax expense - plug figure
dr/cr. Deferred Tax Asset/Liability - **the adjustment entry **(or the opening balance if it is the first year)
cr. Income tax payable (the amount that is for taxes purposes)
