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Lecture Intermediate accounting (IFRS 2nd edition): Chapter 19 - Kieso, Weygandt, Warfield

Chapter 19 - Accounting for income taxes. After completing this chapter you should be able to: Identify differences between pretax financial income and taxable income, describe a temporary difference that results in future taxable amounts, describe a temporary difference that results in future deductible amounts, explain the purpose of a deferred tax asset valuation allowance. | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 19 Describe various temporary and permanent differences. Explain the effect of various tax rates and tax rate changes on deferred income taxes. Apply accounting procedures for a loss carryback and a loss carryforward. Describe the presentation of income taxes in financial statements. Indicate the basic principles of the asset-liability method. After studying this chapter, you should be able to: Accounting for Income Taxes 19 LEARNING OBJECTIVES Identify differences between pretax financial income and taxable income. Describe a temporary difference that results in future taxable amounts. Describe a temporary difference that results in future deductible amounts. Explain the non-recognition of a deferred tax asset. Describe the presentation of income tax expense in the income statement. Corporations must file income tax returns following the guidelines developed by the appropriate tax authority. Because IFRS and tax regulations differ in a number of ways, frequently the amounts reported for the following will differ: Income tax expense (IFRS) Income taxes payable (Tax Authority) LO 1 ACCOUNTING FOR INCOME TAXES Tax Code Financial Statements Pretax Financial Income IFRS Income Tax Expense Taxable Income Income Taxes Payable Tax Return vs. LO 1 ACCOUNTING FOR INCOME TAXES Illustration: Chelsea, Inc. reported revenues of $130,000 and expenses of $60,000 in each of its first three years of operations. For tax purposes, Chelsea reported the same expenses to the IRS in each of the years. Chelsea reported taxable revenues of $100,000 in 2015, $150,000 in 2016, and $140,000 in 2017. What is the effect on the accounts of reporting different amounts of revenue for IFRS versus tax? LO 1 ACCOUNTING FOR INCOME TAXES Revenues Expenses Pretax financial income Income tax expense (40%) $130,000 60,000 $70,000 $28,000 $130,000 2016 60,000 $70,000 $28,000 $130,000 2017 60,000 $70,000 $28,000 . | PREVIEW OF CHAPTER Intermediate Accounting IFRS 2nd Edition Kieso, Weygandt, and Warfield 19 Describe various temporary and permanent differences. Explain the effect of various tax rates and tax rate changes on deferred income taxes. Apply accounting procedures for a loss carryback and a loss carryforward. Describe the presentation of income taxes in financial statements. Indicate the basic principles of the asset-liability method. After studying this chapter, you should be able to: Accounting for Income Taxes 19 LEARNING OBJECTIVES Identify differences between pretax financial income and taxable income. Describe a temporary difference that results in future taxable amounts. Describe a temporary difference that results in future deductible amounts. Explain the non-recognition of a deferred tax asset. Describe the presentation of income tax expense in the income statement. Corporations must file income tax returns following the guidelines developed by the appropriate tax authority. .