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- Definitions The FASB has defined several terms in regard to accounting for income taxes. Below are various code letters (for terms) followed by definitions. 1. The deferred tax consequences of future deductible amounts and operating loss carryforwards 2. A difference between the tax basis of an asset or liability and its reported amount in the financial statements that will result in taxable or deductible amounts in future years when the reported amount of the asset or liability is recovered or settled, respectively 3. Temporary difference that results in taxable amounts in future years when the related asset or liability is recovered or settled, respectively 4. The future effects on income taxes, as measured by the applicable enacted tax rate and provisions of the enacted tax low, resulting from temporary differences and operating loss carryforwards at the end of the current year 5. The change during the year in a corporations deferred tax liabilities and assets 6. The deferred tax consequences of future taxable amounts 7. The portion of o deferred tax asset for which it is more likely than not that a tax benefit will not be realized 8. Temporary difference that results in deductible amounts in future years when the related asset or liability is recovered or settled, respectively 9. The sum of income tax payable and deferred tax expense (or benefit) 10. The amount of income taxes paid or payable (or refundable) for the current year 11. An excess of tax deductible expenses over taxable revenues in a year that may be carried forward to reduce taxable income in a future year 12. The excess of taxable revenues over tax deductible expenses and exemptions for the year 13. Income tax expense divided by income before income taxesWhich of the following is not a cause of a difference between pretax financial income and taxable income in a given period? a. operating loss carryforwards b. permanent differences c. applicable tax rates d. temporary differencesThe definition of gross income in the tax law is: All items specifically listed as income in the tax law All cash payments received for goods provided and services performed All income from whatever source derived All income from whatever source derived unless the income is earned illegally
- Recognition of tax benefits in the operating loss year due to a loss carryforward requires O only a note to the financial statements. the establishment of a deferred tax liability. the establishment of a deferred tax asset. the establishment of an income tax refund receivable.Recognition of tax benefits in the loss year due to a NOL carry back involves: O The establishment of an income tax refund receivable. Only a note to the financial statements. The establishment of a deferred tax liability. O The establishment of a deferred tax asset.Future Tax Deductions A. Result in deferred tax liabilities. B.Rresult in deferred tax assets. C. Occur where the tax basis of assets is less than the financial reporting basis. D. Occurs where the tax basis of liabilities is more than the financial reporting basis.
- A deferred tax liability or asset that is related to an asset or liability shall be classified in the statement of financial position based on the expected reversal date of the temporary difference. a. TRUE b. FALSEThis is not a requisite for business expense to be deductible. Group of answer choices It must be reasonable It must be ordinary and necessary It must be paid during the taxable year The withholding tax otherwise required have been deducted and remitted to the BIRA net operating loss occurs when tax-deductible expenses exceed taxable revenues. Tax laws permit the net operating loss to be used to reduce taxable income in future profitable years. How are loss carryforwards recognized for financial reporting purposes?
- Which of the following is false? a. Under GAAP, deferred taxes are reported based on the classification of the asset or liability to which it relates. b. Under IFRS, all potential liabilities must be recognized. c. Under GAAP, the enacted tax rate is used to measure deferred tax assets and liabilities. d. Under IFRS, all deferred tax assets and liabilities are classified as non-current.The entry to recognize that a portion of a deferred tax asset would more likely than not be not utilized would include which of the following line items? (' O A credit to deferred tax asset O A credit to income tax expense O A credit to a valuation account O A credit to deferred tax liability AOf the following temporary differences, which one ordinarily creates a deferred tax asset? O Installment sales for tax reporting. O Fines paid for violation of law. O Prepaid expenses. O Estimated warranty expense.
