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1. Taxable income is a tax accounting term and is also referred to as income before taxes.;2. Pretax financial income is the amount used to compute income tax payable.;3. Taxable amounts increase taxable income in future years.;4. A deferred tax liability represents the increase in taxes payable in future years as a result of taxable temporary differences existing at the end of the current year.;5. Deductible amounts cause taxable income to be greater than pretax financial income in the future as a result of existing temporary differences.;6. A deferred tax asset represents the increase in taxes refundable in future years as a result of deductible temporary differences existing at the end of the current year.;7. A company reduces a deferred tax asset by a valuation allowance if it is probable that it will not realize some portion of the deferred tax asset.;8. Companies should consider both positive and negative evidence to determine whether it needs to record a valuation allowance to reduce a deferred tax asset.;9. A company should add a decrease in a deferred tax liability to income tax payable in computing income tax expense.;10. Taxable temporary differences will result in taxable amounts in future years when the related assets are recovered.;11. Examples of taxable temporary differences are subscriptions received in advance and advance rental receipts.;12. Permanent differences do not give rise to future taxable or deductible amounts.;13. 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.;14. 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.;15. Under the loss carryback approach, companies must apply a current year loss to the most recent year first and then to an earlier year.;16. The tax effect of a loss carryforward represents future tax savings and results in the recognition of a deferred tax asset.;17. 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.;18. 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.;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.


Paper#35568 | Written in 18-Jul-2015

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