Cpa Report
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CPA Report
Anderson Wood
ACC 545
October 2nd, 2009
Samantha Smith
CPA Report
For organization’s to understand financial reporting under generally accepted accounting principles they will need to understand various affects to the financial statements. This discussion will contemplate deferred taxes, correction of accounting changes and errors, and the rationale behind a corporate subsidiary.
The process used to determine deferred taxes.
Organization’s compute income tax payable based on the regulations of taxing authorities. For financial reporting under GAAP companies report taxable income based on financial reported income. There are differences that arise between the financial income and taxable income based on such things as when revenue is recognized. GAAP financial reporting is based accruals while tax reporting is based on modified cash reporting. Deferred tax assets and liabilities represent the difference between GAAP financial statements and income and expenses that are recognized on an organization’s taxes for a period. They represent a future effect to taxes that is not represented on financial reports.
Deferred liabilities can be a difference in depreciation that is accelerated on a fixed asset purchase for taxes which establish an expense that will be smaller or nonexistent in the future tax periods. Adjustments are made to the balance sheets accounts when the deferred tax is temporary, meaning the event that caused the difference between financial reporting and tax reporting will equal. When an event is permanent it will always be different and no changes to a financial statement accounts is necessary. Differences that are permanent have specific taxation reasons like the deductibility of life insurance premiums since life insurance proceeds are not taxable.
Deferred tax assets and liabilities are reported on the balance sheet and current assets or liabilities are netted together, this applies to noncurrent as well. Loss carry...
Anderson Wood
ACC 545
October 2nd, 2009
Samantha Smith
CPA Report
For organization’s to understand financial reporting under generally accepted accounting principles they will need to understand various affects to the financial statements. This discussion will contemplate deferred taxes, correction of accounting changes and errors, and the rationale behind a corporate subsidiary.
The process used to determine deferred taxes.
Organization’s compute income tax payable based on the regulations of taxing authorities. For financial reporting under GAAP companies report taxable income based on financial reported income. There are differences that arise between the financial income and taxable income based on such things as when revenue is recognized. GAAP financial reporting is based accruals while tax reporting is based on modified cash reporting. Deferred tax assets and liabilities represent the difference between GAAP financial statements and income and expenses that are recognized on an organization’s taxes for a period. They represent a future effect to taxes that is not represented on financial reports.
Deferred liabilities can be a difference in depreciation that is accelerated on a fixed asset purchase for taxes which establish an expense that will be smaller or nonexistent in the future tax periods. Adjustments are made to the balance sheets accounts when the deferred tax is temporary, meaning the event that caused the difference between financial reporting and tax reporting will equal. When an event is permanent it will always be different and no changes to a financial statement accounts is necessary. Differences that are permanent have specific taxation reasons like the deductibility of life insurance premiums since life insurance proceeds are not taxable.
Deferred tax assets and liabilities are reported on the balance sheet and current assets or liabilities are netted together, this applies to noncurrent as well. Loss carry...