Income Tax Flashcards
Defined Benefit Pension Plan
Pension Plan Assets and liabilities are shown netted on the balance sheet.
Projected Benefit Obligation (PBO)
Liability = Projected benefit obligation - Pension plan assets at fair value
Funded status is the difference between projected benefit obligation and plan assets at fair value
Actuarial Gain goes to credit pension gain/loss other comprehensive income.
Income taxes
Deferred tax liabilities uses the future tax rate.
Deferred Tax Asset
There is more expense on the books than what is claimed on the taxes. In the future I can claim those deductions. This creates a tax asset.
Deferred Tax Liability
There is less expense on the book than what is being claimed on the taxes. This creates a liability in future years because you are claiming more deductions than you currently have.
There are four types of transactions that can cause a temporary difference, which are:
Delayed recognition of taxable income
Accelerated recognition of taxable income
Delayed recognition of expenses for tax purposes
Accelerated recognition of expenses for tax purposes
interperiod tax allocation
is the temporary difference between the effects of tax policy on the financial reporting of a business and its normal financial reporting as mandated by an accounting framework, such as GAAP
Classification of deferred tax accounts.
If the deferred asset/liability is current or non current is based on whatever the deferral comes from. AR is current and any tax deferral based on that would also be current.
Valuation allowance for a deferred tax asset
if there is a more than 50% probability that the company will not realize some portion of the asset. Any changes to this allowance are to be recorded within income from continuing operations on the income statement. The need for a valuation allowance is especially likely if a business has a history of letting various carry forwards expire unused, or it expects to incur losses in the next few years.
Net operating losses
can be carried back 2 year or forward 20. This is a reduction in income for that year and the refund is based on the tax rate. This election is made in the tax year and is irrevocable for that years net operating loss. If back is elected that amount is immediately refundable up to the amount of tax actually paid.
Net operating losses and mergers
Net operating loss tax benefits can be transferred to the new entity after a merger which can be attractive for some companies.
