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TAX EFFECT ACCOUNTING

It changed the way companies considered and recorded their income tax expense for any financial period. This method also reflects the premise that the calculation of income tax expense should be based on the accounting profit and loss earned for the period and that income tax liability represented the tax payable on taxable income. This practice requires reconciliation between the amount of tax expense calculated in the company's accounting records and the estimate of the company's liability for tax payable made in accordance with rules of income tax legislation. Any differences discovered in doing this reconciliation are accounted for in the financial statements of the company.
             Sims & Cliff (2001, p. 315) go on to state that "as part of the International Harmonisation project of the Australian accounting standard setters, the principles underlying the method of accounting for company income tax will change in the financial year of 2003". They go on to say that AASB 1020 was reissued in December 1999 with the new title Income Taxes, following a lengthy exposure period to ED 87 "Income Taxes".
             Keyes of AARF (online) outlines that:.
             In consistent with the proposals in Exposure Draft ED 87 "Income Taxes" and the requirements in the International Accounting Standards Committee's Standard IAS 12 "Income Taxes" (and the US's equivalent Standard SFAS 109 "Accounting for Income Taxes"), the revised Standards adopt a comprehensive balance sheet liability method of tax-effect accounting. That method is based on the general principle that the current and future income tax consequences of all transactions and other events recognised in an entity's statement of financial position give rise to current and deferred tax liabilities and assets. It adopts the notions of "tax base" and "temporary difference", using the following formulae:.
             Carrying amounts of assets or liabilities - Tax bases of assets or liabilities = Assessable or deductible temporary differences.


Essays Related to TAX EFFECT ACCOUNTING

1. Tax Effect Accounting

I have also studied tax-effect accounting thoroughly in various textbooks, articles and journals. ... INTRODUCTION The current practice of accounting for company income tax is known as "tax-effect accounting". ... Sims and Cliff (2001, p.314) states that "AASB 1020 Accounting for Income Tax (Tax-Effect Accounting) was issued in 1989". ... This essay will look into the new tax-effect accounting and then identify the significant differences between the conceptual basis of tax-effect accounting adopted in the revised and superseded Standards. ... The New Tax Effect Accounting The revis...

  • Word Count: 2621
  • Approx Pages: 10
  • Has Bibliography
  • Grade Level: Undergraduate

2. Tax Effect Accounting

I have also studied tax-effect accounting thoroughly in various textbooks, articles and journals. ... INTRODUCTION The current practice of accounting for company income tax is known as "tax-effect accounting". ... Sims and Cliff (2001, p.314) states that "AASB 1020 Accounting for Income Tax (Tax-Effect Accounting) was issued in 1989". ... This essay will look into the new tax-effect accounting and then identify the significant differences between the conceptual basis of tax-effect accounting adopted in the revised and superseded Standards. ... The New Tax Effect Accounting The revis...

  • Word Count: 2770
  • Approx Pages: 11
  • Has Bibliography
  • Grade Level: Undergraduate

3. Expected Changes in Tax Effect Accounting

Carry forward of tax losses aside, the result of applying tax effect accounting is to decrease the volatility in net profit that would be experienced because of the effect of timing differences on the amount of income tax expense recognized. Suggest that the motivation for managers in adopting tax effect accounting is to minimize this volatility. If this is correct, it explains why listed companies embraced tax effect accounting although there was no compulsion to do so until 31 December 1989. Ryan et al. reported that for reporting periods 1976-77, 1977-78 and 1978-75, more than 80 percent of...

  • Word Count: 411
  • Approx Pages: 2
  • Grade Level: High School

4. Accounts

The most significant way your business is affected by the accounting method you choose involves the tax year in which income and particular expense items will be counted. For instance, if you incur expenses in the 2002 tax year but don't pay them until the 2003 tax year, you won't be able to claim them in 2002 if you use the cash method. ... This means that Zara can deduct the $400 from her taxable income of 2002. ... Tax Years and Accounting Periods Income and expenses must be reported to the IRS for a specific period of time, called your tax year, your accounting period or ...

  • Word Count: 3170
  • Approx Pages: 13
  • Grade Level: Undergraduate

5. Bush Tax Relief

It seems as though each person, depending on their own political affiliations, principles and suspicions of opposing parties, believes different things to be true about the purpose of the recent tax cut and the effect it will have on the current economy. ... The recent nature of the tax cut has also had an effect on the conflicting views, since all the sources are mere predictions and therefore cannot base their analyses on concrete information and experience. ... According to the official Bush tax relief website, the typical household of four will be able to save at least $1,600 of their ow...

  • Word Count: 2226
  • Approx Pages: 9
  • Grade Level: Undergraduate

6. Tax Cuts

Tax Cuts Recent polls that were conducted after the Bush tax cut proposal suggested that only 45% of the public backs the bill. ... I believe that the tax cuts should be permanent. ... In conclusion, for the tax cut to have a positive effect on the longer-run growth of income accruing to Americans, there must be a positive effect on work incentives, and this effect must exceed the negative effect on national saving that occurs because some of the budget surplus would now be used for greater consumption. ... Otherwise, the effect of the tax cut on growth would be dissipated through a larger ...

  • Word Count: 502
  • Approx Pages: 2
  • Grade Level: High School

7. Finance, Banking, Trade and Tax Structure

(7) Exemption of commercial tax and customs duty on the imported items like fertilizers, agricultural machineries and implements, insecticides and pesticides, medicines and raw materials... All the imports are subject to pay the license fees, customs duty and commercial tax. Customs duty together with the commercial tax and corporate income tax are collected at the point of entry and the time of clearance of imported goods. ... There are 14 tariff bands ranging from 0% to 40 % Cars, luxury items, jewelry, and items produced in Myanmar face the highest tariffs; those on other items are modera...

  • Word Count: 9814
  • Approx Pages: 39

8. Accounting

For example Sandy Roberts and Jane Howard explained accounting in their book Introductory Accounting, 1996, p.5, as, accounting is the process of "Recording everyday transactions in an accurate and logical manner by setting up an appropriate accounting system." ... For example overstating the profit figure for the year, might be interesting for the owners at the beginning, and may make them think that it is not important and will not effect any one. ... Accountants break these rules when the business is trying to pay lesser taxes, or not to pay back to their creditors. ... Taxes are calculated...

  • Word Count: 2465
  • Approx Pages: 10
  • Has Bibliography
  • Grade Level: High School

9. German accounting

Several, however, have adopted international accounting standards, publishing consolidated accounts according to US GAAP and IASC methods. ... This is reflected, for instance, in the required valuation method based on a strict form of historical cost, in order for tax values to be objective and auditable. ... Indeed, tax accounting in Germany can play havoc with accounting information provided in non-consolidated accounts, making it difficult to compare accounting results with those of US or UK companies, although deferred tax accounting of late has mitigated some of the impact. Probably th...

  • Word Count: 1649
  • Approx Pages: 7
  • Grade Level: Undergraduate

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