Chapter 13 - Income tax reporting. After studying this chapter you will be able to understand: The different objectives underlying income determination for financial reporting (book) purposes versus tax purposes; the distinction between temporary (timing) and permanent differences, the items that cause these differences, and how each affects book income versus taxable income; the distortions created when the deferred tax effects of temporary differences are ignored;. | Income Tax Reporting Revsine/Collins/Johnson/Mittelstaedt/Soffer: Chapter 13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education Learning objectives The different objectives underlying income determination for financial reporting (book) purposes versus tax purposes. The distinction between temporary (timing) and permanent differences, the items that cause these differences, and how each affects book income versus taxable income. The distortions created when the deferred tax effects of temporary differences are ignored. How tax expense is determined with interperiod tax allocation and the relation between taxes payable, changes in deferred taxes and tax expense. Measuring and reporting valuation differences for deferred tax assets. 13- Learning objectives: Concluded How changes in tax rates are measured and recorded. The reporting rules for net operating loss carrybacks and carry-forwards. How to read and interpret tax note disclosures and how these footnotes can be used to enhance comparisons across firms. Financial statement disclosures on uncertain tax positions. How tax notes disclosures can be used to improve financial statement analysis. Key differences between IFRS and . GAAP rules for reporting of income taxes. 13- Book income and taxable income Intended to reflect increases in the firm’s “well-offness”. Includes all earned inflows of net assets, even when the inflow is not immediately convertible into cash. Reflects expenses as they accrue, not just when they are paid. Governed by the “constructive receipt/ability to pay” doctrine. The timing of taxation usually (but not always) follows the inflow of cash or equivalents. Deductions generally are allowed only when the expenditures are made or when a loss occurs. Book Income: Income computed for financial reporting purposes Taxable Income: Income computed for tax compliance purposes ≠ Divergence . | Income Tax Reporting Revsine/Collins/Johnson/Mittelstaedt/Soffer: Chapter 13 Copyright © 2015 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education Learning objectives The different objectives underlying income determination for financial reporting (book) purposes versus tax purposes. The distinction between temporary (timing) and permanent differences, the items that cause these differences, and how each affects book income versus taxable income. The distortions created when the deferred tax effects of temporary differences are ignored. How tax expense is determined with interperiod tax allocation and the relation between taxes payable, changes in deferred taxes and tax expense. Measuring and reporting valuation differences for deferred tax assets. 13- Learning objectives: Concluded How changes in tax rates are measured and recorded. The reporting rules for net operating loss carrybacks and .
