Income Taxes Flashcards
How do you calculate the Effective Tax Rate?
Start with NIBT, add/subtract adjustments, this becomes adjusted NIBT. Multiply adj. NIBT times the tax rate. Divide this result by the NIBT before adjustments. The resulting value is the Effective Tax Rate.
Temporary differences for expenses
Tax expense exceeds the expenses on the financial statement, this means TI will be lower than BI in the current year. When the item reverses itself next year, TI will be higher which results in a FTA. FTAs result in a DTL.
Tax expense is lower than the expenses on the financial statement, this means TI will be higher than BI in the current year. When the item reverses itself next year, TI will be lower which results in a FDA. FDAs result in a DTA.
Temporary differences for income
TI was lower than book income on the financial statement for the current year. This means TI will be higher than BI when the item reverses itself next year which results in a FTA. FTAs result in a DTL.
TI was higher than book income on the financial statement for the current year. This means TI will be lower than BI when the item reverses itself next year which results in a FDA. FDAs result in a DTA.
Are there any deferred tax implications for depletion expenses?
No. The percentage depletion and the cost depletion will never reverse themselves and therefore, will be a permanent difference, and as such no DTA or DTL will ever be recorded.
How do you calculate income taxes for Interim Reporting?
Add YTD income for the applicable quarters.
Multiply the cumulative income by estimated annual effective tax rate.
Subtract the income tax expense recognized in prior quarters.
Under what circumstances can an entity recognize, under IFRS, a deferred tax asset?
To the extent that it is probable and that it will be realized.
What is the LIFO conformity rule?
It’s when an entity uses LIFO for tax purposes and must equally use LIFO for financial statement purposes.
