Flashcards in Deferred Taxes Deck (8):
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
Deduction will reduce future income taxes expense.
Income will be taxable in a future period and will increase future tax expense
The FUTURE enacted tax rate not the current one.
It is never discounted to present value.
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
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
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