Income Tax Flashcards
What concept is the justification for the method of determining periodic deferred tax expense based on?
Recognition of assets and liabilities
What is reported whenever income is recognized in the FS before it is reported as taxable income?
Deferred tax liability
Where would the tax benefit of a loss carried forward (that reduces current taxes pyable) be included?
In income from continuing operations
How do you calculate double declining depreciation?
Cost x (year/useful life) x percent double declining
Are differences in uncollectible accounts expense permanent or temporary?
Temporary because bad debts must be written off
Are premium expenses on life insurance permanent or temporary?
Permanent
Under IFRS, how are all DTAs and DTLs classified?
As noncurrent on the B/S
What arises when an item is included in the calculation of NI in one year and in taxable income in a different year?
Temporary difference
How do you find the effective tax rate?
Effective tax rate = Income tax expense / Pretax income
Should you disclose the types and amounts of existing permanent differences in the FS related to deferred taxes?
No because there are no deferred taxes for permanent differences
Intraperiod tax allocation
Involves apportioning the total tax provision for financial accounting purposes in a period b/w the income and loss from :
- Income from continuing operations
- Discontinued operations
- Accounting principle change
- OCI (PUFER)
- Components of S/H equity
Are penalties paid for legal violations permanent or temporary differences?
Permanent
Change in valuation allowance
A change in circumstances that causes a change in judgment about the ability to realize the related deferred tax asset in future years should be recognized in income from continuing ops. in period of change
Which approach is used to determine income tax expense under GAAP?
Asset and liability approach (B/S approach)
What are the 2 rules regarding netting deferred tax assets/liabilities?
- All Current deferred tax liabilities and assets must be offset and presented as one amount
- All noncurrent deferred tax liabilities and assets of a particular tax jurisdiction must be offset and presented as one amount
Current income tax expense/benefit
Equal to the income taxes payable or refundable for the current year, as determined on the corporate tax return for the current year (owe now)
Deferred income tax expense/benefit
Equal to the change in deferred tax liability or asset account on the B/S from the beginning of the current year to the end of the current year (balance sheet approach)
Total income tax expense/benefit
Current income tax payable or refundable as determined on the corporate tax return (current)[B/S] +/- Change in deferred income tax asset or liability from the beginning to the end of the reporting period (later)[B/S] = Total income tax expense/benefit [I/S]
When is the enacted tax rate used?
For deferred taxes (temporary differences) in periods the taxable items are expected to be paid or realized (use the enacted tax rates for that period, not necessarily period the item is incurred)
Dividend received deduction (exclusion) rules
Ownership 0-19% => 70% exclusion
Ownership 20-80% => 80% exclusion
Ownership over 80% => 100% exclusion
Are DRDs permanent or temporary differences?
Permanent
How would an increase in prepaid insurance affect deferred income tax?
Cause an increase in deferred income tax liability
How would an increase in rent receivable affect deferred income tax?
Cause an increase in deferred income tax liability
