F6: Income Taxes Flashcards Preview

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Flashcards in F6: Income Taxes Deck (20):
1

Accounting for income taxes involves what two tax allocations?

-Intraperiod
-Interperiod

2

Intraperiod Tax Allocation

apportions the total tax provision for financial accounting purposes between the income or loss from IDEA PUFER

3

Objective of interperiod tax allocation

To recognize through the matching principle the amount of current and future tax related to events that have been recognized

4

Two types of differences between pretax GAAP and taxable income

1- Temporary Differences
2- Permanent Differences

5

Permanent Differences affect what?

Current, not deferred

6

Temporary Differences affect what?

Both Current and Deferred

7

What approach is required by GAAP for comprehensive allocation?

The Balance Sheet Approach (aka the asset and liability method)

8

Balance Sheet Approach

-Items that are recognized first for tax purposes will eventually be recognized for GAAP (and vice versa)
-These items are therefore temporary and require an asset or a liability on the books until the difference turns around completely

9

Formula for interperiod tax allocation

Current income tax payable (B/S)
+- change in deferred income tax balance (B/S)
= Total income tax expense or benefit (I/S)

10

Do permanent differences need an interperiod tax allocation?

No- no deferred taxes are needed

11

Do temporary differences need an interperiod tax allocation?

Yes- deferred taxes are required

12

Deferred Tax Liability happens when:

Future tax accounting income > future financial accounting income

13

Deferred Tax Asset happens when:
(think gift card)

Future tax accounting income < future financial accounting income

14

If it is more likely than not (more than 50%) that part or all of the deferred tax asset will not be realized, what happens?

A valuation allowance account in recognized
(contra account)

15

Valuation Allowances: GAAP vs IFRS

GAAP- allows them
IFRS- does note

16

When is the enacted tax rate used?

Used for deferred taxes for temporary differences only

17

Use the tax rate in effect when the temporary difference:

Reverses itself!

18

Changes in tax laws or rates are recognized when?

In the period of change

19

An adjustment from a change in tax laws goes where?

Income from continuing operations

20

Always remember to net _____ the balance sheet and not ________

net across; not up and down