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Intermediate Accounting: Reporting...
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Intermediate Accounting: Reporting...
Asset/Liability Method and Temporary Differences
Interperiod tax allocation is necessary because there are differences in the timing of revenues and expenses between a corporation’s financial statements and its federal income tax returns.
Required:
- 1. Identify the two goals and four basic principles of accounting for income taxes.
- 2. Briefly explain interperiod income tax allocation under generally accepted accounting principles.
- 3. List the four groups of items that result in temporary differences and give examples for each group.
1.
State the two goals and four basic principles of accounting for income taxes.
As per Financial Accounting Standards Board, the two goals of accounting for income taxes are as follows:
- A business entity has to recognize the amount of income tax payable (refund) for the current year.
- A business entity has to record the deferred tax assets and liabilities for the future tax concerns of all events that have been reported in its financial statements for income tax return.
The four business of accounting for income taxes are as follows:
- A business entity should recognize the current tax liability (asset) for the anticipated income tax payable (refund) on its income tax return for the present current financial year...
2.
Elaborate the inter-period income tax allocation according to Generally Accepted Accounting Principles.
3.
State the four groups of items and the examples for each group that result in temporary differences.
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