F6: Leases, Derivatives, Foreign Currency Accounting, and Income Taxes Flashcards
What criteria must be met for a lessee to classify as a finance lease?
Ownership, Written purchase option, Net present value is equal to or greater than asset’s underlying value (90%) Economic life (75%), Specialized. OWNES!!
What is an example of a deferred tax asset?
Expenses that are recognized in financial income this year and deductible next year.
Which approach is used to determine income tax expense?
Asset and liability approach (a.k.a. Balance Sheet approach)
Valuation allowance is only applicable to which kind of deferred tax?
Deferred tax asset.
Are deferred income tax assets and liabilities classified as current or noncurrent?
Noncurrent asset or liability. ALWAYS.
Depreciation for Tax purposes exceeded depreciation for financial statement purposes. Is this a deferred tax asset or liability?
Deferred tax liability. Will owe more taxes in the future.
How is income tax expense estimated on a quarterly basis?
Each quarter using the effective tax rate expected to apply to the entire year.
What are the three areas of income tax expense calculations?
Current tax expense, Deferred taxes, Total taxes
NOLs can be carried forward indefinitely, but what changes were made for tax years 2021 and beyond regarding NOLs?
NOLs are limited to 80% of taxable income in tax years 2021 and beyond.
How do you calculate income tax expense on an interim statement?
Multiply the year-to-date income by the effective rate and subtract any previously recorded tax expense in prior quarters.
