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Example of a Deferred Tax Liability

We have the following information about an asset of a company. Original cost: $1,500,000 Useful life of the asset: 3 years Salvage value: $0 Depreciation for accounting purpose: $500,000 per year using straight line method Depreciation for taxation purpose: $600,000...

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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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