Set 5 FR 23 Income Taxes Flashcards
Entry for tax payable current year
DR income tax expense, CR income tax payable
How is the income tax shown when instalments are paid on the balance sheet?
Netted out, to reflect total amount actually due
What are some permanent differences between accounting income and tax income, which are not subject to tax? Income-based.
dividends received from Canadian corporation by another Canadian corporation
50% of a capital gain
What are some permanent differences between accounting income and tax income, which are not subject to tax? Expense-based.
50% of meals and entertainment
golf club membership
interest and penalties on taxes
political contributions
define deferred tax liability
tax paid now is less than actually due because of temp differences
define deferred tax asset
tax paid now is more than actually due because of temp differences
Step 1 is to determine taxable differences. why do temporary differences between tax and accounting income occur?
tax and accounting treatments are different
examples of temp differences
Depreciation vs CCA
warranty liability/decom asset/lease asset etc - all expense as incurred, no liabilities for tax
FVTPL vs FTVOCI - how is this treated
50% of gain is treated as a temp difference. deferred tax basis equal to: original cost + [(FV – original cost) / 2]
Step 2 is to analyze tax base vs accounting base. Table to do this? Use positive numbers for assets and negative numbers for liabilities.
Item / Accounting basis / Tax basis / Temp difference (taxable)
Once you have the total temp differences, what is the next step? What if the number is negative? Postive?
Mutiply by the tax rate substanstively enacted at reporting date. Negative = deferred tax liability. Positive = deferred tax asset.
FInal step - reporting the DTA/DTL
Adjust DTA/DTL to the correct amount, taking into account the current amount sitting on the B/S.
Loss carryback/forward - how long?
Back - 3 years. Forward - 20 years.
Strategy to utilize tax losses
- can apply to that with highest tax rate first to get the most refund
- can apply to the oldest first (3 years back) due to rules
Strategy to utilize tax losses - JE
DR Income tax rec
CR Current income tax recoverable
Loss carryforwards - what needs to be assessed?
If entity is likely to make taxable income in the future to offset
Loss carryforwards - rate used / JE
tax rate at time it’s expected to be used.
DR deferred tax, CR deferred income tax (recovery)
Disclosures under IFRS
components of income tax expense, separating out current/deferred and benefits from these
separate disclosure of taxes from discontinued ops, continued ops and OCI items
each type of temp. difference
unused loss carryforwards and tax credits
reconciliation of effective tax rates to statutory rates
ASPE differences - terms used
IFRS - deferred income tax
ASPE - future income taxes
ASPE differences - methods of use
IFRS - must use current and deferred taxes
ASPE - can choose future income taxes or taxes payable method
ASPE - disclosures
- separate disclosure of income taxes on earnings from continued operations, earnings from discontinued operations, and amounts charged directly to equity
- current income tax expense and future income tax expense (if future income taxes method used)
- if the taxes payable method is used, then a reconciliation of the income tax rate to the statutory rate, either by percentages or dollar amounts
- unused loss carryforwards and tax credits
- recovery of refundable taxes
- if an entity is not subject to tax, then disclosure of this fact
