Income Taxes

Asset GAAP Basis > Asset Tax Basis

DTL

net income =

pretax GAAP Income - Income Tax Expense

DTL is a

credit account

DTA is a

debit account

income tax expense consists of:

• current income tax expense

• deferred income tax expense

What are the steps to compute the income tax journal entry?

1. credit income tax payable

2. adjust deferred tax liability

3. plug the difference to income tax expense

How are DTL presented on the balance sheet?

non-current liability

DTA

Liability GAAP Basis > Liability Tax Basis

What does a higher GAAP basis than tax basis for installment sale receivable create?

DTL

What does a higher GAAP basis than tax basis for FV-NI investment account create?

DTL

What does a higher GAAP basis than tax basis for equity method investment create?

DTL

What does a higher GAAP basis than tax basis for prepaid expenses create?

DTL

What does a higher GAAP basis than tax basis for fixed assets create?

DTL

What does a higher GAAP basis than tax basis for purchased intangibles create?

DTL

What does a higher GAAP basis than tax basis for deferred revenue create?

DTA

What does a higher GAAP basis than tax basis for deferred rent revenue create?

DTA

What does a higher GAAP basis than tax basis for deferred contract revenue create?

DTA

What does a higher GAAP basis than tax basis for warranty liability create?

DTA

What does a lower GAAP basis than tax basis for FV-NI investment account create?

DTA

What does a lower GAAP basis than tax basis for accounts receivable create?

DTA

Reconciling items

tax on permanent difference / Pretax GAAP income

Effective tax rate

income tax expense / pretax GAAP income