In 1992, SFAS No. 109 succeeded SFAS No. 96 and restored consistency in terms of a largely evenhanded treatment relative to the balance sheet recognition of deferred tax assets and liabilities.
Permanent differences between published statements and tax returns are not subject to
the allocation process.
What is SFAS 109?
FAS 109 Summary
This Statement
establishes financial accounting and reporting standards for the effects of income taxes
that result from an enterprise's activities during the current and preceding years. It requires an asset and liability approach for financial accounting and reporting for income taxes.
What is the difference between a future taxable amount and a future deductible amount when is it appropriate to record a valuation account for a deferred tax asset?
Future taxable amounts increase taxable income and result in deferred tax liabilities for financial reporting purposes; future deductible amounts
decrease taxable income
and result in deferred tax assets for financial reporting purposes.
What is the difference between recognition and realization in the recording of a deferred tax asset on a balance sheet?
What is the difference between recognition and realization as it applies to the recording of a deferred tax asset on a balance sheet? –
RECOGNITION
: relates to whether it is “probable” the company has the right to a future tax benefit, in which case the company can record the deferred tax asset on the balance sheet.
Which of the following causes a temporary difference between taxable and pretax accounting income?
Computation of deferred tax assets and liabilities based on temporary differences. Which of the following causes a temporary difference between taxable and pretax accounting income? …
Straight-line depreciation for financial reporting and accelerated depreciation for tax reporting
.
What replaced FAS 109?
SFAS 109 is required for fiscal years beginning after December 15, 1992. Generally, a change from
APB 11
or SFAS 96 to SFAS 109 is handled as a change in accounting principle in accordance with APB 20.
What is the deferred tax liability?
The deferred tax liability on a company balance sheet represents
a future tax payment that the company is obligated to pay in the future
. 2. It is calculated as the company's anticipated tax rate times the difference between its taxable income and accounting earnings before taxes.
How is deferred tax calculated?
There are
no strict rules
for deferred tax calculation as it is merely the difference between gross profit in a Profit & Loss Account and a tax statement. As per Income Statement (Rs.) As per Tax Statement (Rs.) Here, as the depreciation computed varies by Rs.
What is uncertain tax position?
In accounting,
a situation in which a taxpayer believes its interpretation of earnings recognition is less strong than what the interpretation of the IRS is likely to be
.
How is deferred tax treated?
If any amount claimed in Income Tax
is more than expensed out in Profit & Loss A/c
, it will create Deferred Tax Liability. The net difference of DTA / DTL is computed and transferred to Profit & Loss A/c. The Balance of Deferred Tax Liability / Asset is reflected in Balance sheet.
Is deferred tax an asset or liability?
A deferred tax asset is an item on the balance sheet that results from the overpayment or the advance payment of taxes. It is the opposite of a
deferred tax liability
, which represents income taxes owed.
Is deferred tax a current liability?
Deferred income tax shows up as
a liability
on the balance sheet. … Deferred income tax can be classified as either a current or long-term liability.
How do you calculate deferred tax asset or liability?
Illustration. In the given situation, excess tax paid today due to the difference among the income computed as per books of the company and the income computed by the income tax authorities is 12,
60,000
– 12,00,000 = 60,000. This amount i.e. 60,000 will be termed as deferred tax asset (DTA).
What is another name for negative taxable income quizlet?
A. A net operating loss (NOL) is negative taxable income for a year – a loss for income tax purposes. An NOL occurs when taxable deductions exceed taxable revenues.
What is one way that a temporary difference between taxable income and financial income can become a deferred tax asset or liability?
The temporary differences
all result from differences between taxable income and pretax financial income
which will reverse and result in taxable or deductible amounts in future periods.
Which of the following is an example of a permanent difference?
A permanent difference is the difference between the tax expense and tax payable caused by an item that does not reverse over time. In other words, it is the difference between financial accounting and tax accounting that is never eliminated. An example of a permanent difference is
a company incurring a fine
.
