GSA 548
Provision for Income Tax Expense
Oct. 9, 2103
Why is this in GSA 548?
Why is this important?
• ASC 740
• FAS 109
• FIN 48
• Schedule M
schedule M
20x1
Gross revenues
Cost of goods sold
Total income (loss) items
U.S. current income tax expense
U.S. deferred income tax expense
Fines and penalties
Deferred compensation
Depreciation
Bad debt exense
Total expense/deduction items
Net income to taxable income
Income(Loss) per
Temporary
Permanent
Income(Loss) per
Income Statement
Difference
Difference
Tax Return
8,000.00
-6,075.00
1,925.00
-266.67
-63.33
-50.00
0.00
-1,000.00
-100.00
-1,480.00
445.00
75.00
75.00
0.00
266.67
8,000.00
-6,000.00
2,000.00
63.33
50.00
0.00
-333.33
100.00
-170.00
-95.00
316.67
316.67
0.00
0.00
-1,333.33
0.00
-1,333.33
666.67
Objective
1. To recognize the amount of taxes payable or
refundable for the current year
2. To recognize deferred tax liabilities and
deferred tax assets for the future tax
consequences of events that have been
recognized in an entities financial statements
or tax returns
Financial Statement Presentation
• Current
• Non current
• Different jurisdictions
mechanics
Book
Accounts receivable
less
Inventory
less
Machine
less
Bonus payable
DIFFERENCE
from book to Tax
debit
credit
Tax
Basis
DTA
500.00
100.00
400.00
100.00
500.00
40.00
1,000.00
75.00
925.00
75.00
1,000.00
30.00
4,000.00
1,000.00
3,000.00
333.33 2,666.67
< 0.00 >
0.00
deferred income tax expense
DTL
133.33
0.00
70.00
63.33
133.33
Book
Accounts receivable
less
Inventory
less
Machine
less
Bonus payable
DIFFERENCE
from book to Tax
debit
credit
Tax
Basis
DTA
325.00
105.00
220.00
105.00
325.00
42.00
910.00
85.00
825.00
85.00
910.00
34.00
4,000.00
2,000.00
2,000.00
< 150.00 >
1,111.11
150.00
888.89
0.00
DTL
444.44
60.00
136.00
444.44
Book
Accounts receivable
less
Inventory
less
Machine
less
Bonus payable
DIFFERENCE
from book to Tax
debit
credit
Tax
Basis
DTA
400.00
130.00
270.00
130.00
400.00
52.00
820.00
95.00
725.00
95.00
820.00
38.00
4,000.00
3,000.00
1,000.00
< 350.00 >
703.70
350.00
296.30
0.00
DTL
281.48
140.00
230.00
281.48
Book
Accounts receivable
less
Inventory
less
Machine
less
Bonus payable
DIFFERENCE
from book to Tax
debit
credit
Tax
Basis
DTA
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
0.00
4,000.00
4,000.00
0.00
< 0.00 >
0.00
0.00
0.00
0.00
DTL
0.00
0.00
0.00
0.00
Valuation Allowance
740-10-30-5(e)
• Reduce DTA by a valuation allowance if, …, it is
more likely than not (…) that some portion or
all of the DTA will not be realized. The
valuation allowance shall be sufficient to
reduce the DTA to the amount that is more
likely than not to be realized.
Valuation Allowance
Deferred Tax Asset
Accounts receivable (net)
Inventory (net)
Bonus payable
Deferred Tax Liabilities
Accelerated depreciation
Deferred Tax Asset
valuation allowance
100.00
125.00
150.00
375.00
250.00
125.00
Valuation Allowance
Possible
Outcome
$125.00
$100.00
$75.00
$50.00
$25.00
Probability
of
Occurring
25%
20%
20%
20%
15%
Cumulative
Probability
25%
45%
65%
85%
100%
Valuation Allowance
740-10-45-5
• The valuation allowance for a particular tax
jurisdiction shall be allocated between current
and noncurrent deferred tax assets …. On a
pro rata basis.
Uncertain Tax Position
FIN 48
Uncertain Tax Position
FIN 48
740-10-25-6 An entity shall initially recognize
the financial statement effects of a tax position
when it is more-likely-than-not, based on the
technical merits, that the position will be
sustained upon examination.
Uncertain Tax Position
FIN 48
740-10-30-7 A tax position that meets the morelikely-than-not recognition threshold shall
initially and subsequently be measured as the
largest amount of the tax benefit that is greater
than 50% likely of being realized upon
settlement
Possible
Outcome
$100.00
$80.00
$60.00
$40.00
$20.00
Probability
of
Occurring
25%
20%
20%
20%
15%
Cumulative
Probability
25%
45%
65%
85%
100%