CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

1.
Under
IFRS an affirmative judgment approach is used for recognizing deferred tax
assets by recognizing assets up to the amount that is probable to be realized.

2.
Under
U.S. GAAP, the rate used to compute deferred taxes is either the enacted tax
rate, or a substantially enacted tax rate (virtually certain).

3.
Under
IFRS, a deferred tax liability is classified as current or noncurrent based on
the classification of the asset or liability to which it relates.

4.
Under
IFRS, all tax effects are charged or credited to income.

5.
Under
IFRS, all potential liabilities associated with uncertain tax positions are
recognized.

Multiple Choice Questions

1.
Which
of the following is false regarding accounting for deferred taxes under IFRS?

a. A deferred tax liability is classified
as current or noncurrent based on the classification of the asset or liability
to which it relates.
b.
A
deferred tax asset is recognized up to the amount that is probable to be
realized.
c.
Tax
effects of certain items are recognized in equity.
d. The rate used to compute deferred
taxes is either the enacted tax rate, or a substantially enacted tax rate
(virtually certain).

2.
Jerome
Co. has the following deferred tax liabilities at December 31, 2012:

Amount

Related to

$100,000

Installment sales, expected to be collected in 2013

$300,000

Fixed asset,
10-year remaining useful life, 2012 tax depreciation exceeds

book depreciation

$90,000

Prepaid insurance related to 2013

What amount would Jerome Co. report
as a noncurrent deferred tax liability under IFRS and

under U.S. GAAP?

IFRS

U.S. GAAP

a.

$0

$400,000

b.

$490,000

$300,000

c.

$300,000

$300,000

d.

$490,000

$490,000

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Accounting for Income Taxes 19 – 43

3.
With regard to recognition of deferred tax assets, IFRS requires

Approach

Recognition

a.

Affirmative judgment

Recognize an asset up to the amount that is probable

to be realized

b.

Impairment approach

Recognize
asset in full, reduced
by valuation

allowance if it’s more likely than
not that all or a

portion of the asset won’t be realized

c.

Affirmative judgment

Recognize
asset in full,
reduced by valuation

allowance if it’s more likely than not that all or a

portion of the asset won’t be realized

d.

Impairment approach

Recognize an asset up to the amount that is probable

to be realized

4.
Match the approach, IFRS or U.S. GAAP, with the location where tax
effects are reported:

Approach

Location

a.

IFRS

Charge or credit only taxable temporary differences to
income

b.

U.S. GAAP

Charge or credit certain tax effects
to equity

c.

IFRS

Charge or credit certain tax effects to equity

d.

U.S. GAAP

Charge or credit
only deductible temporary
differences to

income

5.
Alice, Inc. has the following deferred tax assets at December 31, 2012:

Amount

Related to

$120,000

Rent revenue collected in advance related to 2013

$50,000

Warranty liability, expected to be paid in 2013

$170,000

Accrued liability related to a
lawsuit expected to settle in 2016

What amount would Alice, Inc. report
as a current deferred tax asset under IFRS and under U.S. GAAP?

_IFRS_

U.S. GAAP

a

$340,000

$340,000

b.

$0

$170,000

c.

$170,000

$340,000

d.

$340,000

$170,000

To download more slides, ebook, solutions and test bank, visit
http://downloadslide.blogspot.com

19 – 44 Test Bank for Intermediate Accounting,
Fourteenth Edition
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Short Answer:

1.
Breifly
describe some of the similarities and differences between U.S. GAAP and IFRS
with respect to income tax accounting.

2.
Describe
the current convergence efforts of the FASB and IASB in the area of accounting
for taxes.

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