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Accounting for income taxes

FAR Chapter 22 · Area III · Blueprint III.D

A company keeps two sets of rules: GAAP for its financial statements and the tax code for its return. Income under the two is rarely the same, and the accounting for income taxes explains the gap. The Blueprint asks you to calculate current and deferred tax, to recall the rules on temporary differences, valuation allowances and uncertain tax positions, and to prepare the tax provision entry. One example company runs through the chapter, and its numbers always tie back to the same journal entry.

In this chapter

1. Two incomes, two kinds of tax
2. Permanent and temporary differences
3. From book income to taxable income, and current tax
4. Deferred tax liabilities and assets
5. The provision entry and the effective rate
6. Rate changes, valuation allowances and loss carryforwards
7. Uncertain tax positions
8. Investee earnings, splitting the tax, and the notes

This chapter has 8 lessons, 50 practice MCQs with explanations and 20 simulations, plus flashcards and a recall sheet.

What this chapter covers

• Current and deferred tax
• temporary differences
• valuation allowance
• uncertain tax positions
• the tax provision entry

Chapter 21: Revenue recognition · Chapter 23: Fair value measurement