CHAPTER 19 ACCOUNTING FOR INCOME TAXES

| November 9, 2018

1.
Examples
of taxable temporary differences are subscriptions received in advance and
advance rental receipts.

2.
Permanent
differences do not give rise to future taxable or deductible amounts.

3.
Companies must consider presently enacted
changes in the tax rate that become effective in future years when determining
the tax rate to apply to existing temporary differences.

4.
When
a change in the tax rate is enacted, the effect is reported as an adjustment to
income tax payable in the period of the change.

5.
Under
the loss carryback approach, companies must apply a current year loss to the
most recent year first and then to an earlier year.

6.
The
tax effect of a loss carryforward represents future tax savings and results in
the recognition of a deferred tax asset.

7.
A
possible source of taxable income that may be available to realize a tax
benefit for loss carryforwards is future reversals of existing taxable
temporary differences.

8.
An
individual deferred tax asset or liability is classified as current or
noncurrent based on the classification of the related asset/liability for
financial reporting purposes.

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Accounting for Income Taxes

19
– 7

19.
Companies
should classify the balances in the deferred tax accounts on the balance sheet
as noncurrent assets and noncurrent liabilities.

20.
The
FASB believes that the deferred tax method is the most consistent method for
accounting for income taxes.

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