Tax Base of Assets and Liabilities

Tax base is the amount at which an asset or liability is valued for tax purposes. Tax Base of Assets The following are a few examples of calculating tax bases for various assets. Asset Calculation of Tax Base Depreciable Equipment The cost of the equipment:...

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Deferred Tax Liabilities and Assets

A deferred tax liability is created when the income tax expense reported in the income statement is higher than the tax payable as per the tax returns due to temporary differences. The difference between the two is reported in the balance sheet as a deferred tax...

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Introduction to Income Tax

Introduction A company’s accounting policies (such as depreciation choices, and valuation of assets) can cause differences in taxes reported in financial statements and taxes reported on tax returns. In this reading “Income Taxes” we will learn about several issues...

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Financial Reporting of Investment Property Vs. PPE

Under US GAAP, there is no distinction between investment property and other long-lived assets. Under IFRS, investment property is distinguished from other long-lived asset. An investment property is the property that the firm owns for earning rental income, earning...

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Disclosures Related to PPE and Intangible Assets

Disclosures under IFRS Disclosures for PPE Measurement basis Depreciation method Estimated useful lives or equivalent depreciation rate Gross carrying amount and accumulated depreciation Reconciliation of carrying amounts at beginning and end The following additional...

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Derecognition of PPE and Intangible Assets

Derecognition happens when an asset is sold, exchanged or abandoned and therefore removed from the balance sheet.   Balance Sheet Income Statement Asset is sold Asset is removed from balance sheet. A loss/gain equal to carrying value less sale proceeds is reported on...

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Impairment of Long-lived Assets

A long-lived asset has become impaired when the book value of the asset as recorded on the balance sheet is not expected to be recovered during future operations. Example A call center operator recently capitalized a $2 million investment in production fixtures at a...

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Revaluation Model for Fixed Assets

US GAAP does not permit firms to revalue the fixed assets on their balance sheets. Assets are reported on the balance sheet after deducting accumulated depreciation and impairment charges. IFRS allows for revaluation if certain conditions are met or guidelines are...

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Amortization of Intangible Assets

As we learned earlier, the intangible assets can have finite lives or indefinite lives. For assets with finite lives, the cost is amortized over the life of the asset. The procedure and methods of amortization are the same as for depreciation, i.e., straight-line...

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