Tham khảo tài liệu 'critical financial accounting problems issues and solutions_5', tài chính - ngân hàng, kế toán - kiểm toán phục vụ nhu cầu học tập, nghiên cứu và làm việc hiệu quả | 66 Critical Financial Accounting Problems this chapter. It is based on FASB Statement No. 109 entitled Accounting for Income Taxes. 1 TEMPORARY DIFFERENCES Interperiod income tax allocation deals with the allocation of the firm s tax obligation as an expense to various periods. It is required because of temporary differences between pretax financial income and taxable income in a given period that will reverse in a later period. They are timing differences because they affect pretax financial income and taxable income in different periods. Two results are 1. A deferred tax liability is the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year. 2. A deferred tax asset is the increase in taxes refundable or saved in future years as a result of deductible temporary differences existing at the end of the current year. Examples of temporary differences include A. Differences between financial accounting income and tax income. A1. Revenues or gains are included in pretax financial income before being included in taxable income. Examples include . Gross profit on installment sales recognized at a point of sale for financial reporting accrual basis but at the time of collection for income tax purposes cash basis . . Gross profit on long-term contracts recognized under the per-centage-of-completion method for financial reporting and the percentage-of-completion capitalized cost method for income tax purposes portion of related gross profit deferred for tax purposes . . Investment income recognized under the equity method for financial reporting and the cost method for tax purposes as dividends are received . . Gain or involuntary conversion of nonmonetary asset recognized for financial reporting but deferred for tax purposes. A2. Revenues or gains are included in taxable income before being included in accounting income. Examples include . Rent interest royalties and subscription .
