中级会计学英文版课件：ch16 Accounting for Income Taxes

Lo/Fisher,

Intermediate

Accounting

Vol.2Chapter

16Copyright

©

2014

Pearson

Canada

Inc.16-

1Accounting

for

Income

TaxesLo/Fisher,

Intermediate

Accounting

Vol.2L.O.

16-1.betweenCopyright

©

2014

Pearson

Canada

Inc.16-

2L.O.

16-2.Describe

the

conceptual

differencesthe

three

methods

of

accounting

for

intaxes and

apply

the

taxes

payable

methodunder

ASPE.Analyze

the

effect

of

permanent

andtemporary

differences

on

income

tax

eand

income

tax

liabilities

under

IFRS.L.O.

16-3.Analyze

the

effect

of

changes

in

tax

rates

oincome

tax

expenses,

assets,

and

liabiand

account

for

these

effects

under

IFRS.LEARNING

OBJECTIVESLo/Fisher,

Intermediate

Accounting

Vol.2L.O.

16-4.Copyright

©

2014

Pearson

Canada

Inc.16-

3Analyze

the

effect

of

tax

losses

on

past

andfuture

income

taxes,

and

evaluate

whetherand

how

much

of

these

tax

loss

benefits

canbe

recognized

as

assets

under

IFRS.L.O.

16-5.Apply

the

presentation

and

disclosurestandards

for

income

taxesSummary

journal

entries

provided

at

the

end

of

slidesLEARNING

OBJECTIVES

(Continued)Lo/Fisher,

Intermediate

Accounting

Vol.2A.

INTRODUCTIONCopyright

©

2014

Pearson

Canada

Inc.16-

4Accounting

for

taxes:

Involves

the

interaction

of

financial

reporand

tax

reportingAccounting

and

tax

rules

differ,

therefore,Accounting

income

differs

from

taxable

incoDealing

with

differences

is

sometimes

complLo/Fisher,

Intermediate

Accounting

Vol.2B.

METHODS

OF

ACCOUNTIINGFOR

INCOME

TAXES

(L.O.

16-1)Three

possible

ways:Taxes

payable

methodIncome

statement

approach

(deferral

method)Balance

sheet

approach

(accrual

method)Methods

2

and

3

are

“tax

allocation”

methodsCopyright

©

2014

Pearson

Canada

Inc.16-

5Lo/Fisher,

Intermediate

Accounting

Vol.21.

Taxes

Payable

MethodSimplest

and

least

costly

method

Income

tax

expense

and

payable

based

on

amountpayable

to

the

tax

authoritiesAccounts

for

federal

and

provincial

taxes

(Canada)Companies

may

make

installment

payments

in

year

Total

tax

expense

=

sum

of

all

installments

+

finalpayment

or

refund

expected

Does

not

satisfy

matching

principle

–

significanassets

and

liabilities

omittedCopyright

©

2014

Pearson

Canada

Inc.16-

6Lo/Fisher,

Intermediate

Accounting

Vol.22.

Tax

Allocation

MethodsAccounting

income

generally

≠

taxable

income

Accounting

income:

–

income

(before

incometax)

recognized

for

financial

reporting

purp

Taxable

income:

–

income

recognized

for

taxpurposesResult:

Income

Tax

Payable

≠

Income

Tax

expenseResults:

balance

sheet

amount

of

assets

and

liabilit differ

between

tax

and

accounting

reportsCopyright

©

2014

Pearson

Canada

Inc.16-

7Lo/Fisher,

Intermediate

Accounting

Vol.2Tax

Allocation

methods

(Continued)Copyright

©

2014

Pearson

Canada

Inc.16-

8

Two

methods

to

account

for

these

temporarydifferences:Deferral

methodAccrual

methodLo/Fisher,

Intermediate

Accounting

Vol.2a.

Income

Statement

Approach

–

Deferral

Method

Deferral

method

-

focuses

on

obtaining

the

incomestatement

value

for

income

tax

expense

that

bestmatches

the

year’s

amount

of

income

recognized

Difference

between

tax

expense

and

tax

payablerecorded

in

a

deferred

tax

accountDeferred

account

can

be

an

asset

or

liabilitySee

Exhibits

16-4

and

16-5Copyright

©

2014

Pearson

Canada

Inc.16-

9Lo/Fisher,

Intermediate

Accounting

Vol.2b.

Balance

Sheet

Approach

–

Accrual

MethodCopyright

©

2014

Pearson

Canada

Inc.16-10

Accrual

method

focuses

on

obtaining

the

balancesheet

value

for

the

income

tax

liability

(or

asset)that

best

reflects

the

assets

and

liabilitiesrecognized

on

the

balance

sheet.

Same

results

as

deferral

method

only

if

no

changesin

tax

rates.

Differs

from

deferral

method

in

terms

of

order

ofcomputationSee

Exhibits

16-10

and

16-11Lo/Fisher,

Intermediate

Accounting

Vol.2Deferral

vs.

AccrualCopyright

©

2014

Pearson

Canada

Inc.16-11Same

amounts

when

tax

rates

do

not

changeWhen

tax

rates

change:

deferral

method

applies

new

tax

rate

to

currentyear’s

income

only-

ignores

effect

on

accumulated

balancesaccrual

method

applies

new

tax

rate

toaccumulated

tax

amounts

on

balance

sheet

and

toany

new

amounts

for

the

current

yearLo/Fisher,

Intermediate

Accounting

Vol.23.

Summary

of

Alternative

ApproachesCopyright

©

2014

Pearson

Canada

Inc.16-12Lo/Fisher,

Intermediate

Accounting

Vol.2Summary

of

Alternative

Approaches

(Continued)Copyright

©

2014

Pearson

Canada

Inc.16-13

Taxes

payable

method

close

to

cash

basisaccounting

–

tax

effect

recorded

in

period

taxbecomes

due/payable

Deferral

method

-

apply

a

percentage

to

an

incomestatement

amount

to

determine

expense

Accrual

method

-

use

the

balance

sheet

to

computethe

amounts

to

recognize

The

accrual

method

is

the

accepted

approach

inboth

IFRS

and

ASPE.ASPE

also

allows

the

taxes

payable

methodLo/Fisher,

Intermediate

Accounting

Vol.2C.

APPLYING

THE

ACCRUAL

METHOD:

PERMANENT

AND

TEMPORARYDIFFERENCES

(L.O.

16-2)

Complexity

in

accounting

for

income

taxes

due

todifference

between:Copyright

©

2014

Pearson

Canada

Inc.16-14(ii)(i)

how

transactions

and

events

are

recordedfor

financial

reporting,

and:how

tax

rules

treat

these

transactions

aevents

Differences

come

in

two

varieties:

permanent

andtemporaryLo/Fisher,

Intermediate

Accounting

Vol.21.

Permanent

DifferencesCopyright

©

2014

Pearson

Canada

Inc.16-15A

permanent

difference

-

arises

from

a

transaction

orevent

that:affects

accounting

income

but

never

taxable

inco oraffects

taxable

income

but

never

accounting

incomeFor

example,

lottery

winnings

are

income

for

financiareporting

but

are

not

taxable

in

Canada.Accounting

and

taxable

income

will

never

reconcileResults

in:

income

tax

expense

=

income

tax

payableLo/Fisher,

Intermediate

Accounting

Vol.2Permanent

Differences

(Continued)Copyright

©

2014

Pearson

Canada

Inc.16-16Lo/Fisher,

Intermediate

Accounting

Vol.2Permanent

Differences

(Continued)Copyright

©

2014

Pearson

Canada

Inc.16-17Lo/Fisher,

Intermediate

Accounting

Vol.22.

Temporary

DifferencesCopyright

©

2014

Pearson

Canada

Inc.16-18

A

temporary

difference

arises

from

a

transaction

orevent

that

affects

both

accounting

income

andtaxable

income

but

just

in

different

reportingperiods

A

temporary

difference

may

be

either

a

taxabletemporary

difference,

ora

deductible

temporarydifference

”Lo/Fisher,

Intermediate

Accounting

Vol.2Temporary

Differences

(Continued)Copyright

©

2014

Pearson

Canada

Inc.16-19

Taxable

temporary

difference

-

temporarydifference

that

results

in

future

taxable

incomebeing

higher

than

accounting

income.

Future

taxable

amounts

give

rise

to

a

deferred

tax

liabilit–

IFRS

term;

ASPE

term

–

“future

income

taxliability”

Deferred

tax

liability

-

amount

of

income

tpayable

in

future

periods

as

a

result

oftaxable

temporary

differencesResults

in

a

liability

on

the

balance

sheetLo/Fisher,

Intermediate

Accounting

Vol.2Temporary

differences

(Continued)

Deductible

temporary

difference

-

temporarydifference

that

results

in

future

taxable

income

beiless

than

accounting

incomeCan

result

from

losses

or

tax

credits

carried

forwar

Results

in

an

asset

for

reduction

in

future

incometaxes

payableIFRS

calls

this

asset

-

“deferred

tax

asset”ASPE

calls

this

asset

–

“future

income

tax

asset”See

Exhibit

16-17Copyright

©

2014

Pearson

Canada

Inc.16-20Lo/Fisher,

Intermediate

Accounting

Vol.2a.

Common

Temporary

DifferencesCopyright

©

2014

Pearson

Canada

Inc.16-21Revenue

on

construction

contractspercentage-of-completion

vs.

completed

contractFair

value

increase

on

biological

assetsFair

value

gains

vs.

income

on

disposalWarranty

costsAccrue

to

match

to

revenue

vs.

when

costs

incurredDepreciation,

depletion,

and

amortizationAccounting

vs.

CCA

rates

and

methodsSee

Exhibit

16-18Lo/Fisher,

Intermediate

Accounting

Vol.2b.

Temporary

Differences

due

to

Depreciation

Capital

cost

allowance

(CCA)

–

depreciation

fortax

purposesUsually

CCA

exceeds

depreciation

for

accounting

Government

allows

higher

deductions

to

encourageinvestment

in

capital

assets

Results

in

taxable

income

tending

to

be

less

thanaccounting

incomeResults

in:

deferred

tax

liabilitiesSee

Exhibit

16-19Copyright

©

2014

Pearson

Canada

Inc.16-22Lo/Fisher,

Intermediate

Accounting

Vol.2Originating

and

Reversing

DifferenceCopyright

©

2014

Pearson

Canada

Inc.16-23

Originating

difference

-

temporary

differencethat

widens

the

gap

between

accounting

and

taxvalues

of

an

asset

or

liability

Reversing

difference

-

temporary

difference

thanarrows

that

gap

between

accounting

and

taxvalues

of

an

asset

or

liability

Temporary

differences

originating

fromdepreciation

tend

to

build

up

over

timeLo/Fisher,

Intermediate

Accounting

Vol.23.

Disposals

of

Depreciable

AssetsSale

or

disposal

may

result

in

a

gain

or

lossGain/loss

=

Proceeds

–

Carrying

value

of

asset

Tax

gain/loss

will

likely

differ

due

to

differencebetween

CCA

and

depreciation

Tax

gain/loss

has

two

components:

regular

incomeand

capital

gains

(only

50%

taxed)Results

in

both

temporary

and

permanent

differenceCopyright

©

2014

Pearson

Canada

Inc.16-24Lo/Fisher,

Intermediate

Accounting

Vol.2a.

Disposal

of

an

Asset

From

an

Asset

Pool

Undepreciated

capital

cost

(UCC)

–

net

carryingamount

of

an

asset

or

asset

class

for

tax

purposesUCC

=

Cost

–

accumulated

CCA

UCC

generally

a

pool

–

costs

are

not

specificallyidentified

with

an

assetResults

in:

pool

being

reduced

with

no

gain/lossFuture

CCA

will

be

less

due

to

reduced

UCC

Results

in:

temporary

difference

=

amount

ofgain/loss

recognized

for

accountingCopyright

©

2014

Pearson

Canada

Inc.16-25Lo/Fisher,

Intermediate

Accounting

Vol.2b.

Disposal

of

Specifically

Identified

Assets

Some

depreciable

assets

need

to

bespecifically

identified

for

tax,

e.g.

buildDisposal

can

result

in

one

of

three

cases:–

See

next

slideCopyright

©

2014

Pearson

Canada

Inc.16-26Lo/Fisher,

Intermediate

Accounting

Vol.2Disposals

of

Specifically

Identified

Assets:-

Possible

OutcomesCopyright

©

2014

Pearson

Canada

Inc.16-27Lo/Fisher,

Intermediate

Accounting

Vol.2Terminal

Loss

and

Recaptured

Depreciation

Terminal

loss

-

tax

loss

from

sale

of

an

asset

forproceeds

below

its

UCC-

Results

in

a

temporary

difference

equal

to

theaccounting

gain/loss

minus

the

terminal

lossRecaptured

depreciation=

sale

proceeds

minus

the

UCC

of

an

asset–

Results

in

a

temporary

difference

(Recaptureminus

accounting

gain/loss)Copyright

©

2014

Pearson

Canada

Inc.16-28Lo/Fisher,

Intermediate

Accounting

Vol.2Recapture

and

Capital

Gains

When

disposal

proceeds

>

cost

of

asset,

bothrecapture

and

capital

gains

(sale

proceeds

–

origicost)

ariseRecapture

is

fully

taxable.Half

of

capital

gains

not

taxable. –

Results

in

a

permanent

differenceSee

Exhibit

16-21Copyright

©

2014

Pearson

Canada

Inc.16-29Lo/Fisher,

Intermediate

Accounting

Vol.24. Schedule

for

Analyzing

Permanent

andTemporary

DifferencesSeparate

columns

for

Accounting

and

Taxable

itemsSeparate

column

for

Temporary

difference

Temporary

differences

appear

in

only

one

of

theAccounting

andTaxablecolumnsPermanent

differences

appear

under

both

columns

Column

bottoms

provide

information

on

tax

expense,taxes

payable,

and

deferred

tax

asset

(or

liability)See

Exhibit

16-22Copyright

©

2014

Pearson

Canada

Inc.16-30Lo/Fisher,

Intermediate

Accounting

Vol.2D.

CHANGES

IN

TAX

RATES

(L.O.

16-3)

Tax

amounts

on

the

balance

sheet

carryforward

from

year

to

yearTax

rates

do

change

Tax

rates

changes

lead

to

changes

in

thevalues

of

the

tax

balancesAdjusted

Deferred

Tax

Balance═

Beginning

Temporary

DifferenceCopyright

©

2014

Pearson

Canada

Inc.16-31Balance

x

New

Tax

RateLo/Fisher,

Intermediate

Accounting

Vol.2Illustration

of

Changes

in

Tax

RatesDelta

Inc.

Case

Facts

Beginning

of

2012,

Delta

had

taxable

temporarydifferences

amounting

to

$400,000

correspondingto

$100,000

of

deferred

tax

liabilities

at

a

tax

ratof

25%

The

government

increased

the

tax

rate

to

30%

atthe

beginning

of

2012

During

2012,

Delta

had

additional

differencesresulting

from

taxable

income

being

$100,000

lessthan

accounting

incomeCopyright

©

2014

Pearson

Canada

Inc.16-32Lo/Fisher,

Intermediate

Accounting

Vol.2Illustration

of

Change

in

Tax

RatesCopyright

©

2014

Pearson

Canada

Inc.16-33Lo/Fisher,

Intermediate

Accounting

Vol.2E.

TAX

LOSSES

(L.O.

16-4)

Tax

laws

allow

losses

to

be

applied

to

surroundingyearsCanadian

tax

laws

allow:Operating

tax

losses

to

be

carried

back

for

3

yearsOperating

tax

losses

to

be

carried

forward

for

20yearsCompanies

may

choose

to:carryback

and

carry-forward,

oronly

carry-forwardCopyright

©

2014

Pearson

Canada

Inc.16-34Lo/Fisher,

Intermediate

Accounting

Vol.21.

Carryback

of

Tax

LossesLoss

used

to

offset

income

in

prior

yearsCarryback

works

as

follows:Company

chooses

one

of

the

previous

threeyears

to

apply

loss,

starting

with

oldest

loss

yeaCompany

recalculates

the

tax

payable

for

thatprior

year

using

revised

taxable

income

thatincludes

the

effect

of

loss

carried

back

(use

taxrate

of

that

prior

year)Difference

between

recalculated

tax

payable

andtax

paid

previously

for

that

year

is

the

refundCopyright

©

2014

Pearson

Canada

Inc.16-35Lo/Fisher,

Intermediate

Accounting

Vol.2.Carryback

of

Tax

Losses

(continued)Recording

Tax

RecoveryIncome

tax

receivable

(asset)

is

recorded

The

credit

goes

to

“Current

income

tax

recovery”income

statement

account

for

negative

incometax

expenseDr.

Income

Tax

Receivable

xxxCr.

Current

Income

Tax

Recovery

xxxCopyright

©

2014

Pearson

Canada

Inc.16-36Lo/Fisher,

Intermediate

Accounting

Vol.22.

Carryforward

of

Tax

LossesCopyright

©

2014

Pearson

Canada

Inc.16-37

If

firm

chooses,

or

if

carryback

not

available,

losseare

carried

forwardResults

in

uncertain

future

cash

flowsLoss

benefit

only

realized

if

firm

has

taxable

income

Asset

recorded

only

if

“probable”

(more

likely

thanot)

that

future

taxable

profit

will

be

available

to

utax

losses

and

tax

creditsSee

Exhibit

16-31Lo/Fisher,

Intermediate

Accounting

Vol.2F.

MEASUREMENT:

NO

DISCOUNTING

FORTHE

VALUE

OF

MONEYTiming

of

tax

cash

flows

vary

over

many

years

IFRS

–

IAS

12

–

does

not

allow

discounting

fordeferred

tax

assets

and

liabilities

Cost

and

benefits,

and,

comparabilityconsiderations

form

rationale

for

requirement.Copyright

©

2014

Pearson

Canada

Inc.16-38Lo/Fisher,

Intermediate

Accounting

Vol.2G.

PRESENTATION

AND

DISCLOSURE(L.O.

16-5)Tax

expense

is

important

to

usersExtensive

presentation

and

disclosure

required

foIncome

tax

expenseIncome

tax

assets

and

liabilitiesCopyright

©

2014

Pearson

Canada

Inc.16-39Lo/Fisher,

Intermediate

Accounting

Vol.21.

Presentation

and

Disclosure

of

Income

TaxExpenseCopyright

©

2014

Pearson

Canada

Inc.16-40Total

tax

expense

must

be

on

the

income

statementTax

expense

components

required

in

the

notesDistinguish

current

vs.

deferred

tax:Current

Tax

ExpenseDiffered

Tax

Expense

due

to

temporarydifference;

and·

Deferred

tax

expense

due

to

changes

in

tax

rates

d

Disclose

impact

of

write-down

of

deferred

tax

asset

orecognition

of

a

previously

unrecognized

deferred

taassetLo/Fisher,

Intermediate

Accounting

Vol.2Presentation

and

Disclosure

of

Income

TaxExpense

(continued)Copyright

©

2014

Pearson

Canada

Inc.16-41

Taxes

on

discontinued

operations

presented

withdiscontinued

operations

or

explained

in

a

noteTaxes

on

items

relating

to

OCI

presented

in

OCIDisclose

difference

(use

dollars

or

rates)

betweenthe

actual

tax

expense

andthe

tax

expense

expected

based

on

the

before- tax

income

multiplied

by

the

statutory

tax

raLo/Fisher,

Intermediate

Accounting

Vol.22.

Presentation

and

Disclosure

ofIncome

Tax

Assets

and

LiabilitiesCopyright

©

2014

Pearson

Canada

Inc.16-42Present

the

following

items

separately:Current

tax

payables

or

recoveriesDeferred

tax

assetsDeferred

tax

liabilities

Offset

only

if

legally

authorized

to

offset:Cannot

offset:Tax

assets

for

one

jurisdiction

against

tax

liabilitieanotherTax

liabilities

of

one

component

entity

with

tax

assetof

anotherLo/Fisher,

Intermediate

Accounting

Vol.2Presentation

and

Disclosure

ofIncome

Tax

Assets

and

Liabilities

(Continued)

Identify

deferred

tax

assets

or

liabilities

accordito

their

sources

Disclose

the

amount

of

deferred

tax

assetsrecognized

for

tax

losses

carried

forward

Classify

non-current

items

when

enterprise

usescurrent/non-current

presentation

for

balance

sheetCopyright

©

2014

Pearson

Canada

Inc.16-43Lo/Fisher,

Intermediate

Accounting

Vol.2ASPE

Disclosure

RequirementsIf

accrual

method

used

disclose

(or

present):current

income

tax

expensefuture

income

tax

expenseincome

taxes

related

to

capital

transactionsunrecognized

tax

assets

arising

from

unusedtax

losses

or

deductible

temporary

differencesCopyright

©

2014

Pearson

Canada

Inc.16-44Lo/Fisher,

Intermediate

Accounting

Vol.2ASPE

Disclosure

RequirementsIf

taxes

payable

method

used:No

disclosure

relating

to

future

income

taxexpense,

deferred

tax

assets,

deferred

tax

liabiProvide

reconciliation

of

(i)

the

effective

inctax

rate

corresponding

to

the

income

tax

expenseto

(ii)

the

statutory

tax

rateIdentify

the

permanent

and

temporary

differencarising

in

the

yearCopyright

©

2014

Pearson

Canada

Inc.16-45Lo/Fisher,

Intermediate

Accounting

Vol.2H.

A

PRACTICAL

ILLUSTRATION:

THOMSONREUTERS

CORPORATIONCopyright

©

2014

Pearson

Canada

Inc.16-46See

Exhibit

16-32

for

Deferred

Tax

Disclosure

byThomson

ReutersLo/Fisher,

Intermediate

Accounting

Vol.2I.

SUBSTANTIVE

DIFFERENCES

BETWEEN

RELEVANTIFRS

AND

ASPECopyright

©

2014

Pearson

Canada

Inc.16-47Lo/Fisher,

Intermediate

Accounting

Vol.2L.O.

16-1.betweenCopyright

©

2014

Pearson

Canada

Inc.16-48L.O.

16-2.Describe

the

conceptual

differencesthe

three

methods

of

accounting

for

intaxes and

apply

the

taxes

payable

methodunder

ASPE.Analyze

the

effect

of

permanent

andtemporary

differences

on

income

tax

eand

income

tax

liabilities

under

IFRS.L.O.

16-3.Analyze

the

effect

of

changes

in

tax

rates

oincome

tax

expenses,

assets,

and

liabiand

account

for

these

effects

under

IFRS.J.

SUMMARYLo/Fisher,

Intermediate

Accounting

Vol.2L.O.

16-4.Copyright

©

2014

Pearson

Canada

Inc.16-49Analyze

the

effect

of

tax

losses

on

past

andfuture

income

taxes,

and

evaluate

whetherand

how

much

of

these

tax

loss

benefits

canbe

recognized

as

assets

under

IFRS.L.O.

16-5.Apply

the

presentation

and

disclosurestandards

for

income

taxes.J.

SUMMARY

(Continued)Lo/Fisher,

Intermediate

Accounting

Vol.2When

Deferred

Tax

Liability

Originates:Copyright

©

2014

Pearson

Canada

Inc.16-50xxxxxxxxxDr.

Income

Tax

Expense

(current)Cr.

Income

Tax

PayableandDr.

Deferred

Tax

ExpenseCr.

Deferred

Tax

LiabilityxxxOr

as

a

Compound

Entry:Dr.

Income

Tax

ExpenseCr.

Income

Tax

PayablexxxxxxCr.

Deferred

Tax

LiabilityxxxJournal

Entries:

Deferred

Tax

LiabilityLo/Fisher,

Intermediate

Accounting

Vol.2As

the

source

of

the

deferred

liability

reversesCopyright

©

2014

Pearson

Canada

Inc.16-51xxxxxxxxxxxxDr.

Income

Tax

Expense

(Current)Cr.

Income

Tax

PayableandDr.

Deferred

tax

LiabilityCr.

Deferred

Tax

Expense

(Benefit)Or

as

a

compound

EntryxxxDr.

Income

Tax

ExpenseDr.

Deferred

Tax

liabilityCr.

Income

Tax

PayablexxxxxxJournal

Entries:

Deferred

Tax