ACC 422 Exam 2 Chapter 18 Deferred Taxes

Who Sets Tax Law?

Congress

Income Tax Liablity is determined by:

Internal Revenue Code

2 Types of Deferred Taxes

1. Temporary

2. Permanent

Permanent Differences

1. interest income received on tax exempt
   securities

2. fines and expenses resulting from
   violations of law

3. Premiums paid for life insurance on key
   officers/employees

interest income received on tax exempt
securities

Deductible

fines and expenses resulting from
violations of law

Non-Deductible

Premiums paid for life insurance on key
officers/employees

Non-Deductible

Deductible / Deferred tax asset

1. Warranty Expense

2. Unearned Revenue

Warranty Expense Impact

GAAP = Lower

Tax = No Impact

Unearned Revenue Impact

GAAP = No Impact

Tax =

Taxable / Deferred Tax Liabilities

1. Depreciation

2. Receivables / Installment Sales

Depreciation Impact

GAAP = No Impact

Tax =

Receivables / Installment Sales

GAAP = Up

Tax = No Impact

For Carrybacks

• Income tax receivable

• benefit on carryback

Carryforwards

• Deferred Tax Asset

• Benefit on Carry forward