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.
- Differences ...