Chapter 16 - Accounting for income taxes. In this chapter we explore the financial accounting and reporting standards for the effects of income taxes. The discussion defines and illustrates temporary differences, which are the basis for recognizing deferred tax assets and deferred tax liabilities, as well as non-temporary differences, which have no deferred tax consequences. | Accounting for Income Taxes 16 Chapter 16: Accounting for Income Taxes Learning Objectives Describe the types of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes. LO1 Identify and describe the types of temporary differences that cause deferred tax assets. LO2 Our first and second learning objectives in Chapter 16 are to describe the types of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes and to identify and describe the types of temporary differences that cause deferred tax assets. The Internal Revenue Code is the set of rules for preparing tax returns. Financial statement income tax expense. IRS income taxes payable. GAAP is the set of rules for preparing financial statements. Usually. . . Results in . . . Results in . . . The objective of accounting for income taxes is to recognize a deferred tax liability or deferred tax asset for the tax consequences of amounts that will become taxable or deductible in future years as a result of transactions or events that already have occurred. Deferred Tax Assets/Liabilities Part I Generally accepted accounting principles is a set of rules for preparing financial statements. Following these principles result in financial statement income tax expense. Part II The Internal Revenue Code is the set of rules for preparing tax returns. Following this code results in the income tax payable to the Internal Revenue Service. Usually, the income tax expense determined using generally accepted accounting principles and the income tax payable determined using the Internal Revenue Code do not equal. The rules used to determine taxable income and those for financial reporting purposes often cause amounts to be included in taxable income in a year later—or earlier—than the year in which they are recognized for financial reporting purposes, or not to be included in taxable income at all. For . | Accounting for Income Taxes 16 Chapter 16: Accounting for Income Taxes Learning Objectives Describe the types of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes. LO1 Identify and describe the types of temporary differences that cause deferred tax assets. LO2 Our first and second learning objectives in Chapter 16 are to describe the types of temporary differences that cause deferred tax liabilities and determine the amounts needed to record periodic income taxes and to identify and describe the types of temporary differences that cause deferred tax assets. The Internal Revenue Code is the set of rules for preparing tax returns. Financial statement income tax expense. IRS income taxes payable. GAAP is the set of rules for preparing financial statements. Usually. . . Results in . . . Results in . . . The objective of accounting for income taxes is to recognize a deferred tax liability or deferred tax asset for the
