Income taxes

Question 1

Income not subject to taxes

Answer 1

Dividends received from a CAD corp to another CAD corp

50% of capital gains

Question 2

Permanent difference items

Answer 2

golf clubs
50% meals
political 
donation
interest on taxes

Question 3

Deferred taxes

Answer 3

Based on temporary differences between assets and liabilities in the treatment of accounting vs taxes

Question 4

Warranty Liability

Answer 4

Accounting: estimates is liability.

Tax: an incurred. Liability is nil.

Question 5

Leases

Answer 5

Accounting. Lease liability on balance sheet.

Tax: as incurred. Liability is nil.

Question 6

Decommissioning provision

Answer 6

Accounting: Liability and asset set up on bs

Tax: as incurred. Asset and Liab are nil

Question 7

Lawsuit accrual

Answer 7

Accounting: Liability set up on bs

Tax: as incurred. Liability is nil

Question 8

PPE

Answer 8

Accounting: cost - depreciation so book value on bs

Tax: CCA basis so UCC balance

Question 9

Deferred development costs (intangible)

Answer 9

Accounting: Asset on bs

Tax: expensed as incurred. Asset is nil

Question 10

Accrued liability ie pensions

Answer 10

Accounting: Liability is set up on bs

Tax: as incurred. Liability is nil

Question 11

Investments recorded at fair value

Answer 11

Accounting: at fair value on bs

Tax: original cost +( FV - original cost) / 2 = temp diff

Question 12

How to calculate temporary difference

Answer 12

Assets = positives
Liabilities = negatives 

Item |Accounting basis| Tax basis| Temp diff

Temp diff = tax basis - accounting

Question 13

How to calculate deferred taxes

Answer 13

Temporary differences x tax rate

pos = tax asset
neg = tax liab

Question 14

Adjust deferred tax asset/ liab

Answer 14

Take opening balance (on bs or case facts)

and adjust to be new balance

Question 15

If going deferred lability to asset

Answer 15

Dr Deferred tax asset - new amount
DR Deferred tax liability - to be nil
CR Deferred tax recovery

Question 16

To calc taxable income

Answer 16

Accounting income

Perm differences:
Add: 
political
donations 
Gold
50% meals

Deduct: Dividends

Temp differences:
Deduct:
 Development costs
CCA
Warranty expenses (actual)

Add:
Depreciation
Warranty expenses (estimated)
Pension expenses (estimated) 
Lawsuit accrual expenses (estimated) 

= taxable income

x tax rate = current income taxes

Question 17

Tax losses

Answer 17

Back 3 years

Forward 20

Question 18

To record loss carryback

Answer 18

dr income tax receivable

cr current income tax recovery

Question 19

ASPE vs IFRS

Answer 19

ASPE = Future income taxes. Can use taxes payable method and ignore deferred

IFRS = deferred taxes