Deferred Taxes

Question 1

GAAP says to recognize a revenue/expense in one period and tax laws say to recognize it in another

Example: Dividends from a subsidiary accounted for using the Equity Method - tax income but not book income

Answer 1

Deferred Taxes

Question 2

Deduction will reduce future income taxes expense.

Answer 2

Deferred Taxes

Question 3

Income will be taxable in a future period and will increase future tax expense

Answer 3

Deferred Taxes

Question 4

The FUTURE enacted tax rate not the current one.

It is never discounted to present value.

Answer 4

Deferred Taxes

Question 5

If it isprobable that not all of a Deferred Tax Asset (debit) will be realized then the Deferred Tax Asset account must be written down (credit) to reflect this

Answer 5

Deferred Taxes

Question 6

They have no tax impact.

When calculating the total differences between book and tax income subtract the permanent differences from the total before applying a future enacted tax rate

Answer 6

Deferred Taxes

Question 7

The sum of Net Changes in Deferred Tax Assets and Deferred Tax Liabilities

GAAP Method for calculating is theAsset and Liability Approach

Note: IFRS uses the Liability approach only

Answer 7

Deferred Taxes

Question 8

Current Deferred Tax Assets and Liabilities will impact income tax expense within 12 months. All current amounts are netted and reported as a single amount on the Balance Sheet

Non-Current Deferred Tax Assets and Liabilities will impact income tax expense 12 months or more fromt he Balance Sheet Date. All non-current amounts are netted and reported as a single amount on the Balance Sheet

Answer 8

Deferred Taxes