ch 19

Which of the following is false regarding accounting for deferred taxes under IFRS?

A deferred tax liability is classified as current or noncurrent based on the classification of the asset or liability to which it relates.

With regard to recognition of deferred tax assets, IFRS requires

Affirmative judgment - Recognize an asset up to the amount that is probable to be realized

A temporary difference arises when a revenue item is reported for tax purposes in a period

After reported Before reported Financial Inc. Financial Inc. -Yes -Yes

Major reasons for disclosure of deferred income tax information is (are)

All of these answer choices are correct: *predicting future cash flows for operating loss carryforwards *better predictions of future cash flows. *better assessment of quality of earnings.

An example of a permanent difference is

All of these answers are correct: *insurance expense for a life insurance policy on officers *interest expense on money borrowed to invest in municipal bonds *proceeds from life insurance on officers

Which of the following will not result in a temporary difference?

All of these will result in a temporary difference: *Product warranty liabilities *Installment sales *Advance rental receipts

Which of the following is a temporary difference classified as a revenue or gain that is taxable after it is recognized in financial income?

An installment sale accounted for on the accrual basis for financial reporting purposes and on the installment (cash) basis for tax purposes.

Which of the following differences would result in future taxable amounts?

Expenses or losses that are tax deductible before they are recognized in financial income.

Machinery was acquired at the beginning of the year. Depreciation recorded during the life of the machinery could result in

Future Future Taxable Deductible -Yes -Yes

Which of the following temporary differences results in a deferred tax asset in the year the temporary difference originates? I. Accrual for product warranty liability. II. Subscriptions received in advance. III. Prepaid insurance expense.

I and II only.

Uncertain tax positions I. Are positions for which the tax authorities may disallow a deduction in whole or in part. II. Include instances in which the tax law is clear and in which the company believes an audit is likely. III. Give rise to tax expense by increasing payables or increasing a deferred tax liability.

I only

Match the approach, IFRS or U.S. GAAP, with the location where tax effects are reported

IFRS - charge credit or credit certain tax effects to equity

Taxable income of a corporation differs from pretax financial income because of

Permanent Diff Temp Diff -Yes -Yes

Which of the following are temporary differences that are normally classified as expenses

Product warranty liabilities

Which of the following is not considered a permanent difference?

Stock-based compensation expense

Tanner, Inc. incurred a financial and taxable loss for 2015. Tanner therefore decided to use the carryback provisions as it had been profitable up to this year. How should the amounts related to the carryback be reported in the 2015 financial statements?

The refund claimed should be shown as a reduction of the loss in 2015.

A company records an unrealized loss on short-term securities. This would result in what type of difference and in what type of deferred income tax?

Type of Difference Deferred Tax -Temporary -Asset

A company uses the equity method to account for an investment for financial reporting purposes. This would result in what type of difference and in what type of deferred income tax?

Type of Difference Deferred Tax -Temporary -Liability

At the December 31, 2014 balance sheet date, Unruh Corporation reports an accrued receivable for financial reporting purposes but not for tax purposes. When this asset is recovered in 2015, a future taxable amount will occur and

Unruh will record a decrease in a deferred tax liability in 2015.

Accounting for income taxes can result in the reporting of deferred taxes as any of the following except

a contra-asset account

Stuart Corporation's taxable income differed from its accounting income computed for this past year. An item that would create a permanent difference in accounting and taxable incomes for Stuart would be

a fine resulting from violations of OSHA regulations.

A deferred tax liability is classified on the balance sheet as either a current or a noncurrent liability. The current amount of a deferred tax liability should generally be

based on the classification of the related asset or liability for financial reporting purposes.

Recognizing a valuation allowance for a deferred tax asset requires that a company

consider all positive and negative information in determining the need for a valuation allowance.

Taxable income of a corporation

differs from accounting income due to differences in interperiod allocation and permanent differences between the two methods of income determination.

Deferred taxes should be presented on the balance sheet

in two amounts: one for the net current amount and one for the net noncurrent amount

The deferred tax expense is the

increase in balance of deferred tax liability minus the increase in balance of deferred tax asset.

With regard to uncertain tax positions, the FASB requires that companies recognize a tax benefit when

it is more likely than not that the tax position will be sustained upon audit.

Assuming a 40% statutory tax rate applies to all years involved, which of the following situations will give rise to reporting a deferred tax liability on the balance sheet? I. A revenue is deferred for financial reporting purposes but not for tax purposes. II. A revenue is deferred for tax purposes but not for financial reporting purposes. III. An expense is deferred for financial reporting purposes but not for tax purposes. IV. An expense is deferred for tax purposes but not for financial reporting purposes

items II and III only

All of the following are procedures for the computation of deferred income taxes except to

measure the total deferred tax asset for deductible temporary differences and operating loss carrybacks

When a change in the tax rate is enacted into law, its effect on existing deferred income tax accounts should be

reported as an adjustment to income tax expense in the period of change

A major distinction between temporary and permanent differences is

temporary differences reverse themselves in subsequent accounting periods, whereas permanent differences do not reverse.

Deferred tax amounts that are related to specific assets or liabilities should be classified as current or noncurrent based on

the classification of the related asset or liability

Recognition of tax benefits in the loss year due to a loss carryforward requires

the establishment of a deferred tax asset

Tax rates other than the current tax rate may be used to calculate the deferred income tax amount on the balance sheet if

the future tax rates have been enacted into law.