F6 - Income Taxes

Question 1

Which approach is used to determine income tax expense?

Answer 1

The Asset and Liability (Sometimes referred to as the Balance Sheet Approach) method is required for GAAP. The asset and liability approach is used to squeeze out the amount of income tax expense after the amount of deferred tax assets and liabilities have been determined.

Question 2

How are DTL and DTAs classified on the Balance Sheet?

Answer 2

Under U.S. GAAP, deferred tax liabilities are classified in the balance sheet based on the classification of the related assets.

For example: In this case, the related asset is a noncurrent asset, so the deferred tax liability is classified as a noncurrent liability.

Question 3

How are DTAs and DTLs netted on the BS?

Answer 3

All current DTA and DTLs are netted as one current asset or liability, and all non-current DTAs and CTL are netted to either a non-current asset or non-current liability.

Question 4

Deferred Tax Expense is equal tooo..

Answer 4

The current period temporary differences time the enacted future tax rate.

Question 5

Deferred Income Tax Liability

Answer 5

The Deferred Income Tax Liability balance equals the future enacted tax rate time the future taxable amounts.

Question 6

The Current Portion of Income Tax Expense

Answer 6

Equals = The Taxable Income for the year x Enacted Rate

Question 7

Justification for the method of determining periodic deferred tax expense is based on the concept of:

Answer 7

Recognition of assets and liabilities

Question 8

If there is no related balance sheet account for the deferred asset or liability how is it treated? (Current vs Non current)

Answer 8

It is classified based upon its expected reversal date

Question 9

How are current and non-current DTA/ DTL reported for IFRS

Answer 9

Under IFRS, all deferred tax assets and liabilities are reported as non current.