Intermediate Exam 4 - Ch 18 Definitions

Carryforwards

Unused tax losses or credits from this year that you "save" to reduce your tax bill in future years. Think of it as a coupon you can’t use today but can save for your next shopping trip.

Current tax expense (benefit)

The actual amount of tax you owe (or are owed as a refund) right now based on this year's tax return.

Deductible temporary differences

A timing gap between accounting and tax rules that will let you pay less tax in the future

Deferred tax asset (DTA)

A line item on the balance sheet representing future tax savings the company expects to use later

Deferred tax consequences

The "future ripple effect" on your taxes caused by timing differences that exist at the end of the current year

Deferred tax expense (benefit)

The total amount your "future tax" accounts (Assets and Liabilities) changed during the year

Deferred tax liability (DTL)

A line item on the balance sheet representing taxes that have been delayed but will eventually have to be paid

Financial income

The profit a company reports to shareholders on its income statement (using GAAP), before taxes are taken out

Income taxes

Any taxes paid to a government (local, state, or federal) that are specifically calculated based on how much profit you made

Income taxes currently payable (refundable)

This is the same as "Current tax expense"—the literal cash amount you currently owe the IRS

Income tax expense (benefit)

The total tax "cost" for the year, calculated by adding what you owe now to any changes in what you'll owe later:

• Total Tax Expense = Current Tax + Deferred Tax

Taxable income

The specific profit amount the government says you must pay taxes on, calculated using tax law rather than accounting rules

Taxable temporary difference

A timing gap between accounting and tax rules that will force you to pay more tax in the future

Tax-planning strategy

A specific business move a company makes to ensure they can actually use their tax "coupons" (carryforwards) before they expire

Temporary difference

A "timing lag" where an item is recorded for accounting in one year but recorded for taxes in a different year

Valuation allowance

A "cautionary" account that reduces a Deferred Tax Asset if it looks like the company won't actually make enough money to use those future tax savings