I am lost when it comes to figuring out the tax base for liabilities…why is it that when the carrying amount of a liability exceeds the tax base of that liability that a deferred tax asset is recorded? I would think that if the carrying amount exceeds the tax base, more tax expense would be recognized on the income statement and would have to paid in taxes later…
although i understand this, i suck at teaching… but here is what i tell you, the time will come, and you will find it to be very easy… till then leave taxes till the end, use your time for something else if you are finding taxes to be crazy… i would be breaking the rules if i told you whether i saw a tax questions when i sat for the exam. but you can take a hint
Hi. I’m finding the tax topic the hardest out of all the ones I’ve looked at so far. My understand is still iffy so take what I say with a grain of salt! From memory, tax bases for liabilities is the carrying amount less any of the associated future revenue that is deductible. So if carrying amount of liability > tax base, it means some of the future revenue associated with the liability (ie an unearned revenue account) is tax deductible, meaning we must have a deferred tax asset that we can later use (ie to offset future revenue thus “deductibility”. Think of it in terms of an unearned revenue account (a liability). If we receive $500 cash in advance for revenue we haven’t earned, and for whatever reason we get taxed on half ($250) the cash receipt, it means we have already paid tax on half the revenue we haven’t earned. We therefore have a deferred tax asset that we can use for later on (in the form of $250 of the revenue being deductible as we have already paid tax on it). In this case it turns out carrying amount is $500, tax base will be carrying amount less deductible revenue ie $500 - $250 = $250. Sorry, not a great explanation, but yeah I’m finding the tax topic is the hardest one (imo)
for me too, the reading about Income tax is just a kind of nightmare. Wasn’t even able to watch the entire Elan video and finally just skipped it for now… :5
Damn! I was relying on the elan video to make it do-able for me!
Let me add what I understood about tax bases (If I am wrong, please correct me) Tax base is the counterpart of carrying amount. What is carrying amount of a liability? Say you got $400 cash that you did not earn. So in future you have to provide good/services worth $400 to someone. So carrying amount of this liability is $400. It doesn’t feature in your income statement because you haven’t earned it yet. Tax base is what you will carry to the future and not pay tax on right now. Let’s say, if you get cash, you have to pay tax on it in that same year so your tax base is $0 (you are not carrying anything forward. You are paying tax on everything right now). But you didn’t have to pay tax on $400 according to your accounting statements. The $400 hasn’t been earned yet. But you have paid tax on it. So you have an asset now. You have already paid extra tax and you can get a deductible in future against it! That’s what I got. I am not the right person to solve doubts on this topic (I have left it mid way; found it too warped to handle right now at least!) but anyway wrote to see if it makes things a little clearer for me too… I think it did (until and unless I am wrong)
Elan on taxes is WAY better than the curriculum. Just force yourself to attentively sit through the video… anish Wrote: ------------------------------------------------------- > Damn! I was relying on the elan video to make it > do-able for me!
Elan video is way better for all the readings i think…it’s just that this reading about income taxes…will come back to it later, can’t just take it now…but for sure, Elan video explain thing very well princealley Wrote: ------------------------------------------------------- > Elan on taxes is WAY better than the curriculum. > Just force yourself to attentively sit through the > video… > > anish Wrote: > -------------------------------------------------- > ----- > > Damn! I was relying on the elan video to make > it > > do-able for me!