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International Financial Statement Analysis Workbook, 2nd Edition by Michael A. Broihahn CFA, Anthony T. Cope CFA, Wendy L. Pirie CFA, Elaine Henry CFA, Thomas R. Robinson CFA

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CHAPTER 11

INCOME TAXES

LEARNING OUTCOMES

After completing this chapter, you will be able to do the following:

  • Describe the differences between accounting profit and taxable income, and define key terms, including deferred tax assets, deferred tax liabilities, valuation allowance, taxes payable, and income tax expense.
  • Explain how deferred tax liabilities and assets are created and the factors that determine how a company’s deferred tax liabilities and assets should be treated for the purposes of financial analysis.
  • Determine the tax base of a company’s assets and liabilities.
  • Calculate income tax expense, income taxes payable, deferred tax assets, and deferred tax liabilities, and calculate and interpret the adjustment to the financial statements related to a change in the income tax rate.
  • Evaluate the impact of tax rate changes on a company’s financial statements and ratios.
  • Distinguish between temporary and permanent differences in pretax accounting income and taxable income.
  • Describe the valuation allowance for deferred tax assets—when it is required and what impact it has on financial statements.
  • Compare a company’s deferred tax items.
  • Analyze disclosures relating to deferred tax items and the effective tax rate reconciliation, and explain how information included in these disclosures affects a company’s financial statements and financial ratios.
  • Identify the key provisions of and differences between income tax accounting under IFRS and U.S. GAAP.

SUMMARY OVERVIEW

  • Differences ...

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