Intermediate Accounting 17 Accounting and Reporting e Taxes.doc

Intermediate Accounting 17 Accounting and Reporting e Taxes
Accounting and Reporting e Taxes
Chapter
17
Accounting for e Taxes
Fundamentals of Accounting for e Taxes
Future taxable amounts and deferred taxes
Future deductible amounts and deferred taxes
e statement presentation
Specific differences
Rate considerations
Accounting Operating Losses
Financial Statement Presentation
Review of Asset-Liability Method
Loss carryback
Loss carryforward
Loss carryback example
Loss carryforward example
Balance sheet
e statement
Fundamentals of Accounting for e Taxes
Corporations must file e tax returns following the guidelines developed by the Internal Revenue Service (IRS), thus they:
LO 1 Identify differences between pretax financial e and taxable e3>.
calculate taxes payable based upon IRS code,
calculate e tax expense based upon GAAP.
Amount reported as tax expense will often differ from the amount of taxes payable to the IRS.
Fundamentals of Accounting for e Taxes
Tax Code
Exchanges
Investors and Creditors
Financial Statements
Pretax Financial e
GAAP
e Tax Expense
Taxable e
e Tax Payable
Tax Return
vs.
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LO 1 Identify differences between pretax financial e and taxable e.
Fundamentals of Accounting for e Taxes
Illustration Assume pany reports revenue in 2007, 2008, and 2009 of $130,000, respectively. The revenue is reported the same for both GAAP and tax purposes. For simplification, assume pany reports one expense, depreciation, over the three years applying the straight-line method for financial reporting purposes (GAAP) and MACRS (IRS) for the tax return. What is the effect on the accounts of using the two different depreciation methods?
LO 1 Identify differences between pretax financial e and taxable e.
Revenues
Expenses (S/L depreciation)
Pretax financial e
e tax expense (40%)
$130,000
30,000
$100,000
$40,000
$130,000
2008
30,000
$100,000
$40,000
$130,000
2009
30,000
$100,000
$40,000
$390,000
Total
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