kieso

weygandt
warfield
INTERMEDIATE team for success
F I F T E E N T H E D I T I O N

Intermediat
Intermediat
ACCOUNTING
e e
Accounting
Accounting

Prepared by
Coby Harmon
Prepared by
University of California,
CobySanta BarbaraPrepared by
Harmon
Westmont
University College SantaCoby
of California, Harmon
Barbara
University of California, Santa Barbara
19-1 Westmont College
 PREVIEW OF CHAPTER 19

Intermediate Accounting
15th Edition
Kieso Weygandt Warfield
19-2
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-3
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Income Taxes

Corporations must file income tax returns following the

guidelines developed by the Internal Revenue Service (IRS).

Because GAAP and tax regulations differ in a number of ways,

the amounts reported for the following will differ:

 income tax expense (GAAP)

 income tax payable (Internal Revenue Code).

19-4 LO 1
 Accounting for Income Taxes

Financial Statements Tax Return

vs.

Pretax Financial Income  Taxable Income

GAAP Tax Code
Income Tax Expense  Income Taxes Payable

19-5 LO 1
 Accounting for Income Taxes

Illustration: Chelsea, Inc. reported revenues of $130,000 and

expenses of $60,000 in each of its first three years of
operations. For tax purposes, Chelsea reported the same
expenses to the IRS in each of the years. Chelsea reported
taxable revenues of $100,000 in 2014, $150,000 in 2015, and
$140,000 in 2016. What is the effect on the accounts of
reporting different amounts of revenue for GAAP versus tax?

19-6 LO 1
 Book vs. Tax Differences
Illustration 19-2
GAAP Reporting 2014 2015 2016 Total

Revenues $130,000 $130,000 $130,000 $390,000

Expenses 60,000 60,000 60,000 180,000
Pretax financial income $70,000 $70,000 $70,000 $210,000

Income tax expense (40%) $28,000 $28,000 $28,000 $84,000

Illustration 19-3
Tax Reporting 2014 2015 2016 Total

Revenues $100,000 $150,000 $140,000 $390,000

Expenses 60,000 60,000 60,000 180,000
Taxable income $40,000 $90,000 $80,000 $210,000

Income tax payable (40%) $16,000 $36,000 $32,000 $84,000

19-7 LO 1
 Book vs. Tax Differences
Illustration 19-4
Comparison 2014 2015 2016 Total

Income tax expense (GAAP) $28,000 $28,000 $28,000 $84,000

Income tax payable (IRS) 16,000 36,000 32,000 84,000
Difference $12,000 $(8,000) $(4,000) $0

Income tax expense (40%) $28,000 $28,000 $28,000 $84,000

Are the differences accounted for in the financial statements? Yes

Year Reporting Requirement

2014 Deferred tax liability account increased to $12,000
2015 Deferred tax liability account reduced by $8,000
2016 Deferred tax liability account reduced by $4,000

19-8 LO 1
 Financial Reporting for 2014

Balance Sheet Income Statement

2014 2014
Assets:
Revenues:

Expenses:
Liabilities:
Deferred taxes 12,000
Income taxes payable 16,000
Income tax expense 28,000
Equity:
Net income (loss)

Where does the “deferred tax liability” get reported in the financial
statements?
19-9 LO 1
 Kerangka Beban Pajak
Paragraf 5

Beban Pajak. Tax expense

Tax payable
Pajak Kini. Pajak Tangguhan. Deferred Tax

Deferred Tax Aset Pajak Tangguhan. Deferred Tax Liabilitas Pajak

Assets Liabilities Tangguhan.

Akibat perbedaan Akibat kompensasi Akibat perbedaan

temporer yang dapat kerugian. temporer kena pajak.
dikurangkan.
Due to Temporary Differences Due to Loss Carryforward
(from current transactions) (from past transactions) 10
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-11
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Future Taxable and Deductible Amounts

A temporary difference is the difference between the tax basis of an

asset or liability and its reported (carrying or book) amount in the
financial statements that will result in taxable amounts or deductible
amounts in future years.

Future Taxable Amounts Future Deductible Amounts

Deferred Tax Liability represents
the increase in taxes payable in
future years as a result of taxable
temporary differences existing at
the end of the current year.
Deferred Tax Asset represents the
increase in taxes refundable (or
saved) in future years as a result of
deductible temporary differences
existing at the end of the current
year.

Illustration 19-22 provides Examples of Temporary Differences

19-12 LO 2
 Future Taxable Amounts

Illustration: In Chelsea’s situation, the only difference between

the book basis and tax basis of the assets and liabilities relates to
accounts receivable that arose from revenue recognized for book
purposes. Chelsea reports accounts receivable at $30,000 in the
December 31, 2014, GAAP-basis balance sheet. However, the
receivables have a zero tax basis.

Illustration 19-5

19-13 LO 2
 Future Taxable Amounts

Illustration: Reversal of Temporary Difference, Chelsea Inc.

Illustration 19-6

Chelsea assumes that it will collect the accounts receivable and report
the $30,000 collection as taxable revenues in future tax returns.
Chelsea does this by recording a deferred tax liability.

19-14 LO 2
 Deferred Taxes

Deferred Tax Liability

A deferred tax liability represents the increase in taxes payable
in future years as a result of taxable temporary differences
existing at the end of the current year.

Illustration 19-4

2014 2015 2016 Total

Income tax expense (GAAP) $28,000 $28,000 $28,000 $84,000

Income tax payable (IRS) 16,000 36,000 32,000 84,000
Difference $12,000 $(8,000) $(4,000) $0

19-15 LO 2
 Deferred Tax Liability

Illustration: Because it is the first year of operations for Chelsea,

there is no deferred tax liability at the beginning of the year.
Chelsea computes the income tax expense for 2014 as follows:
Illustration 19-9

19-16 LO 2
 Deferred Tax Liability Illustration 19-9
Computation of Income
Tax Expense, 2014

Chelsea makes the following entry at the end of 2014 to record

income taxes.

Income Tax Expense 28,000

Income Taxes Payable 16,000
Deferred Tax Liability 12,000

19-17 LO 2
 Book vs. Tax Differences
Illustration 19-4
Comparison 2014 2015 2016 Total

Income tax expense (GAAP) $28,000 $28,000 $28,000 $84,000

Income tax payable (IRS) 16,000 36,000 32,000 84,000
Difference $12,000 $(8,000) $(4,000) $0

Income tax expense (40%) $28,000 $28,000 $28,000 $84,000

Are the differences accounted for in the financial statements? Yes

Year Reporting Requirement

2014 Deferred tax liability account increased to $12,000
2015 Deferred tax liability account reduced by $8,000
2016 Deferred tax liability account reduced by $4,000

19-18 LO 1
 Deferred Tax Liability Illustration 19-10
Computation of Income
Tax Expense for 2015

Chelsea makes the following entry at the end of 2015 to record

income taxes.

Income Tax Expense 28,000

Deferred Tax Liability 8,000
Income Taxes Payable 36,000

19-19 LO 2
 Deferred Tax Liability

The entry to record income taxes at the end of 2016 reduces the
Deferred Tax Liability by $4,000. The Deferred Tax Liability account
appears as follows at the end of 2016.

Illustration 19-11

19-20 LO 2
19-21 LO 2
 Deferred Tax Liability

Illustration: Starfleet Corporation has one temporary difference at

the end of 2014 that will reverse and cause taxable amounts of
$55,000 in 2015, $60,000 in 2016, and $75,000 in 2017. Starfleet’s
pretax financial income for 2014 is $400,000, and the tax rate is 30%
for all years. There are no deferred taxes at the beginning of 2014.

Instructions

a) Compute taxable income and income taxes payable for 2014.

b) Prepare the journal entry to record income tax expense,

deferred income taxes, and income taxes payable for 2014.

19-22 LO 2
 Deferred Tax Liability

Illustration: Current Yr.

INCOME: 2014 2015 2016 2017
Financial income (GAAP) 400,000
Temporary Diff. (190,000) 55,000 60,000 75,000
Taxable income (IRS) a. 210,000 55,000 60,000 75,000
Tax rate 30% 30% 30% 30%
Income tax a. 63,000 16,500 18,000 22,500

b. Income Tax Expense (plug) 120,000

Income Taxes Payable 63,000
Deferred Tax Liability 57,000

19-23 LO 2
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-24
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Future Deductible Amounts

Illustration: During 2014, Cunningham Inc. estimated its warranty

costs related to the sale of microwave ovens to be $500,000, paid
evenly over the next two years. For book purposes, in 2014
Cunningham reported warranty expense and a related estimated
liability for warranties of $500,000 in its financial statements. For
tax purposes, the warranty tax deduction is not allowed until paid.

Illustration 19-12

19-25 LO 3
 Future Deductible Amounts

Illustration: Reversal of Temporary Difference.

Illustration 19-13

2014 2015 2016

When Cunningham pays the warranty liability, it reports an expense

(deductible amount) for tax purposes. Cunningham reports this future
tax benefit in the December 31, 2014, balance sheet as a deferred tax
asset.
19-26 LO 3
 Future Deductible Amounts

Deferred Tax Asset

A deferred tax asset represents the increase in taxes
refundable (or saved) in future years as a result of deductible
temporary differences existing at the end of the current year.

19-27 LO 3
 Deferred Tax Asset

Illustration: Hunt Co. accrues a loss and a related liability of

$50,000 in 2014 for financial reporting purposes because of
pending litigation. Hunt cannot deduct this amount for tax purposes
until the period it pays the liability, expected in 2015.
Illustration 19-14

19-28 LO 3
 Deferred Tax Asset

Assume that 2014 is Hunt’s first year of operations, and income tax
payable is $100,000, compute income tax expense.
Illustration 19-16

Prepare the entry at the end of 2014 to record income taxes.

Income Tax Expense 80,000
Deferred Tax Asset 20,000
Income Taxes Payable 100,000
19-29 LO 3
 Deferred Tax Asset

Computation of Income Tax Expense for 2015.

Illustration 19-17

Prepare the entry at the end of 2015 to record income taxes.

Income Tax Expense 160,000
Deferred Tax Asset 20,000
Income Taxes Payable 140,000
19-30 LO 3
Hunt wins the litigation case in 2015
 Deferred Tax Asset

The entry to record income taxes at the end of 2015 reduces the
Deferred Tax Asset by $20,000.

Illustration 19-18

19-31 LO 3
 Deferred Tax Asset

Illustration: Columbia Corporation has one temporary difference at

the end of 2014 that will reverse and cause deductible amounts of
$50,000 in 2015, $65,000 in 2016, and $40,000 in 2017. Columbia’s
pretax financial income for 2014 is $200,000 and the tax rate is 34%
for all years. There are no deferred taxes at the beginning of 2014.
Columbia expects to be profitable in the future.

Instructions

a) Compute taxable income and income taxes payable for 2014.

b) Prepare the journal entry to record income tax expense, deferred

income taxes, and income taxes payable for 2014.

19-32 LO 3
 Deferred Tax Asset

Illustration Current Yr.

INCOME: 2014 2015 2016 2017
Financial income (GAAP) 200,000
Temporary Diff. 155,000 (50,000) (65,000) (40,000)
Taxable income (IRS) a. 355,000 (50,000) (65,000) (40,000)
Tax rate 34% 34% 34% 34%
Income tax a. 120,700 (17,000) (22,100) (13,600)

b. Income Tax Expense 68,000

Deferred Tax Asset 52,700
Income Taxes Payable 120,700
Advance slide in presentation
19-33
mode to reveal answers.
LO 3
19-34 LO 3
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-35
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Income Taxes

Deferred Tax Asset—Valuation Allowance

A company should reduce a deferred tax asset by a valuation
allowance if it is more likely than not that it will not realize
some portion or all of the deferred tax asset.

“More likely than not” means a level of likelihood of at least

slightly more than 50 percent.

19-36 LO 4
 Deferred Tax Asset—Valuation Allowance

Illustration: Callaway Corp. has a deferred tax asset balance of

$150,000 at the end of 2014 due to a single cumulative temporary
difference of $375,000. At the end of 2015 this same temporary
difference has increased to a cumulative amount of $500,000.
Taxable income for 2015 is $850,000. The tax rate is 40% for all
years. No valuation account is in existence at the end of 2014.

Instructions
Assuming that it is more likely than not that $30,000 of the deferred
tax asset will not be realized, prepare the journal entries required for
2015.

19-37 LO 4
 Deferred Tax Asset—Valuation Allowance
Illustration: Current Yr.
INCOME: 2013 2014 2015
Financial income (GAAP) 725,000
Temporary difference 375,000 125,000 (500,000)
Taxable income (IRS) 375,000 850,000 (500,000) -
Tax rate 40% 40% 40% 40%
Income tax 150,000 340,000 (200,000) -

Income Tax Expense 290,000

Deferred Tax Asset 50,000
Income Taxes Payable 340,000

Income Tax Expense 30,000

Allowance for Deferred Tax Asset 30,000
19-38 LO 4
 Deferred Tax Asset—Valuation Allowance

Balance Sheet Presentation

Assets: 2014
Deferred tax asset $ 200,000
Allowance for deferred tax (30,000)
Deferred tax asset, net 170,000

19-39 LO 4
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-40
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Income Taxes

Income Statement Presentation

Formula to Compute Income Tax Expense Illustration 19-20

Income Taxes Change In Income Tax

Payable Or + Deferred Income = Expense or
-
Refundable Taxes Benefit

In the income statement or in the notes to the financial

statements, a company should disclose the significant
components of income tax expense (current and deferred).

19-41 LO 5
 Income Statement Presentation

Given the previous information related to Chelsea Inc.,

Chelsea reports its income statement as follows.
Illustration 19-21

19-42 LO 5
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-43
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Income Taxes

Specific Differences
Temporary Differences
 Taxable temporary differences - Deferred tax liability
 Deductible temporary differences - Deferred tax
Asset

19-44 LO 6
 Temporary Differences Illustration 19-22
Examples of Temporary
Differences

Revenues or gains are taxable after they are recognized in financial income.

An asset (e.g., accounts receivable or investment) may be recognized for revenues or

gains that will result in taxable amounts in future years when the asset is recovered.
Examples:
1. Sales accounted for on the accrual basis for financial reporting purposes and on the
installment (cash) basis for tax purposes.
2. Contracts accounted for under the percentage-of-completion method for financial
reporting purposes and a portion of related gross profit deferred for tax purposes.
3. Investments accounted for under the equity method for financial reporting purposes
and under the cost method for tax purposes.
4. Gain on involuntary conversion of nonmonetary asset which is recognized for
financial reporting purposes but deferred for tax purposes.
5. Unrealized holding gains for financial reporting purposes (including use of the fair
value option), but deferred for tax purposes.

19-45 LO 6
 Temporary Differences Illustration 19-22
Examples of Temporary
Differences

Expenses or losses are deductible after they are recognized in financial income.

A liability (or contra asset) may be recognized for expenses or losses that will result in
deductible amounts in future years when the liability is settled. Examples:
1. Product warranty liabilities.
2. Estimated liabilities related to discontinued operations or restructurings.
3. Litigation accruals.
4. Bad debt expense recognized using the allowance method for financial reporting
purposes; direct write-off method used for tax purposes.
5. Stock-based compensation expense.
6. Unrealized holding losses for financial reporting purposes (including use of the fair
value option), but deferred for tax purposes.

19-46 LO 6
 Temporary Differences Illustration 19-22
Examples of Temporary
Differences

Revenues or gains are taxable before they are recognized in financial income.

A liability may be recognized for an advance payment for goods or services to be

provided in future years. For tax purposes, the advance payment is included in taxable
income upon the receipt of cash. Future sacrifices to provide goods or services (or
future refunds to those who cancel their orders) that settle the liability will result in
deductible amounts in future years. Examples:
1. Subscriptions received in advance.
2. Advance rental receipts.
3. Sales and leasebacks for financial reporting purposes (income deferral) but
reported as sales for tax purposes.
4. Prepaid contracts and royalties received in advance.

19-47 LO 6
 Temporary Differences Illustration 19-22
Examples of Temporary
Differences

Expenses or losses are deductible before they are recognized in financial income.

The cost of an asset may have been deducted for tax purposes faster than it was
expensed for financial reporting purposes. Amounts received upon future recovery of
the amount of the asset for financial reporting (through use or sale) will exceed the
remaining tax basis of the asset and thereby result in taxable amounts in future
years. Examples:
1. Depreciable property, depletable resources, and intangibles.
2. Deductible pension funding exceeding expense.
3. Prepaid expenses that are deducted on the tax return in the period paid.

19-48 LO 6
 Specific Differences

Originating and Reversing Aspects of Temporary

Differences.
 Originating temporary difference is the initial difference
between the book basis and the tax basis of an asset or
liability.

 Reversing difference occurs when eliminating a temporary

difference that originated in prior periods and then removing
the related tax effect from the deferred tax account.

19-49 LO 6
 Specific Differences

Permanent differences result from items that (1) enter into

pretax financial income but never into taxable income or (2)
enter into taxable income but never into pretax financial income.

Permanent differences affect only the period in which they occur.

They do not give rise to future taxable or deductible amounts.
There are no deferred tax consequences to be recognized.

19-50 LO 6
 Permanent Differences Illustration 19-24
Examples of Permanent
Differences

Items are recognized for financial reporting purposes but not for tax purposes.

Examples:
1. Depreciable property, depletable resources, and intangibles.
2. Interest received on state and municipal obligations.
3. Expenses incurred in obtaining tax-exempt income.
4. Proceeds from life insurance carried by the company on key officers or employees.
5. Premiums paid for life insurance carried by the company on key officers or
employees (company is beneficiary).
6. Fines and expenses resulting from a violation of law.

Items are recognized for tax purposes but not for financial reporting purposes.

Examples:
1. “Percentage depletion” of natural resources in excess of their cost.
2. The deduction for dividends received from U.S. corporations, generally 70% or 80%.

19-51 LO 6
 Contoh Perbedaan Temporer Kena Pajak (1)
Paragraf 16

Pendapatan Bunga
Akuntansi mengakui pendapatan, setiap Pajak mengakui pendapatan, hanya saat
akhir periode akuntansi (pembuatan AJP) pembayaran telah dilaksanakan ??
atau saat pembayaran.

Nilai Perolehan Aset

Akuntansi mengakui setiap biaya yang Pajak mengenal biaya yang tidak boleh
dikeluarkan sebagai komponen nilai dikapitalisasi sebagai nilai perolehan
perolehan. aset (misal gratifikasi untuk HPH).
52
 Contoh Perbedaan Temporer Kena Pajak (2)
Paragraf 16

Metode Depresiasi atau Amortisasi Aset

Jika metode akuntansi lebih lambat Jika metode pajak lebih cepat (misal
(misal straight line), maka muncul double declining), maka muncul liabilitas
liabilitas pajak tangguhan. pajak tangguhan.

Biaya penelitian dan pengembangan (litbang).

Akuntansi memperbolehkan kapitalisasi Pajak mengharuskan pengakuan biaya
biaya litbang setelah pasti litbang saat dikeluarkan secara
kemanfaatannya. sekaligus.
53
 Contoh Perbedaan Temporer Kena Pajak (3)
Paragraf 17 dan 19

Revaluasi Aset Tanpa Diikuti Penyesuaian DPP

Akuntansi memperbolehkan dilakukannya Pajak memperbolehkan revaluasi, hanya atas
revaluasi ketika nilai buku dirasa tidak sesuai izin Dirjen Pajak dan dilakukan maksimal
dengan nilai aset yang sebenarnya. lima tahun sekali untuk setiap asetnya.

Pencatatan Berdasar Nilai Wajar (Fair Value).

PSAK 13, 16, 19, dan 55 memperbolehkan Pajak hanya memperbolehkan pencatatan
pencatatan berdasar nilai wajar. Liabililitas berdasar pendekatan nilai perolehan yang
muncul ketika terjadi kenaikan nilai aset. didepresiasi atau diamortisasi.
54
 Contoh Perbedaan Temporer Kena Pajak (4)
Lampiran A Poin A

Pendapatan Atas Penjualan Barang

Akuntansi mengakui pendapatan saat Pajak mengakui pendapatan saat
barang telah dikirimkan. pembayaran telah diterima???.

Beban Dibayar Di Muka

Akuntansi mengakui beban dibayar di Pajak mengakui pembebanan atas beban
muka secara bertahap, proporsional dibayar di muka secara sekaligus??.
terhadap periode waktu.
55
 Specific Differences
Illustration
Do the following generate:
 Future Deductible Amount = Deferred Tax Asset
 Future Taxable Amount = Deferred Tax Liability
 Permanent Difference

1. The MACRS depreciation system is used for tax Future Taxable

purposes, and the straight-line depreciation method Amount
is used for financial reporting purposes. Liability

2. A landlord collects some rents in advance. Rents Future Deductible

received are taxable in the period when they are Amount

received. Asset

3. Expenses are incurred in obtaining tax-exempt Permanent

income. Difference

19-56 MACRS = modified accelerated cost recovery system LO 6

 Specific Differences
Illustration
Do the following generate:
 Future Deductible Amount = Deferred Tax Asset
 Future Taxable Amount = Deferred Tax Liability
 Permanent Difference
Future Deductible
4. Costs of guarantees and warranties are estimated Amount
and accrued for financial reporting purposes. Asset

5. Installment sales of investments are accounted for

Future Taxable
by the accrual method for financial reporting Amount
purposes and the installment-sales method for tax Liability
purposes.

6. Proceeds are received from a life insurance

Permanent
company because of the death of a key officer (the Difference
company carries a policy on key officers).
19-57 LO 6
 Specific Differences

Illustration: Havaci Company reports pretax financial income of

$80,000 for 2014. The following items cause taxable income to be
different than pretax financial income.
1. Depreciation on the tax return is greater than depreciation on
the income statement by $16,000.
2. Rent collected on the tax return is greater than rent earned on
the income statement by $27,000.
3. Fines for pollution appear as an expense of $11,000 on the
income statement.
Havaci’s tax rate is 30% for all years, and the company expects to
report taxable income in all future years. There are no deferred taxes
at the beginning of 2014.

19-58 LO 6
 Specific Differences
Illustration: Current Yr. Deferred Deferred
INCOME: 2014 Asset Liability
Financial income (GAAP) $ 80,000
Excess tax depreciation (16,000) $ 16,000
Excess rent collected 27,000 $ (27,000)
Fines (permanent) 11,000
Taxable income (IRS) 102,000 (27,000) 16,000 -
Tax rate 30% 30% 30%
Income tax $ 30,600 $ (8,100) $ 4,800 -

Income Tax Expense 27,300

Deferred Tax Asset 8,100
Deferred Tax Liability 4,800
Income Taxes Payable 30,600
Advance slide in presentation
19-59
mode to reveal answers.
LO 6
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-60
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Income Taxes

Tax Rate Considerations

Future Tax Rates
A company must consider presently enacted changes in the tax
rate that become effective for a particular future year(s) when
determining the tax rate to apply to existing temporary
differences.

In determining the appropriate enacted tax rate for a given year,

companies must use the average tax rate.

19-61 LO 7
 Accounting for Income Taxes

Tax Rate Considerations

Revision of Future Tax Rates
When a change in the tax rate is enacted, companies should
record its effect on the existing deferred income tax accounts
immediately.

A company reports the effect as an adjustment to income tax

expense in the period of the change.

19-62 LO 7
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-63
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Accounting for Net Operating Losses

Net operating loss (NOL) = tax-deductible expenses exceed

taxable revenues.

The federal tax laws permit taxpayers to use the losses of one
year to offset the profits of other years (loss carryback and
loss carryforward).

19-64 LO 8
 Accounting for Net Operating Losses

Loss Carryback
 Back 2 years and forward 20 years

 Losses must be applied to earliest year first

Illustration 19-29

19-65 LO 8
 Accounting for Net Operating Losses

Loss Carryforward
 May elect to forgo loss carryback and

 Carryforward losses 20 years

Illustration 19-30

19-66 LO 8
 Accounting for Net Operating Losses
carryback
Illustration: Conlin Corporation had the following tax information.

Taxable Tax Taxes

Year Income Rate Paid
2012 $ 300,000 35% $ 105,000
2013 325,000 30% 97,500
2014 400,000 30% 120,000

In 2015 Conlin suffered a net operating loss of $480,000, which it

elected to carry back. The 2015 enacted tax rate is 29%.
Prepare Conlin’s entry to record the effect of the loss carryback.

19-67 LO 8
 Accounting for Net Operating Losses
Illustration: 2012 2013 2014 2015
Financial income $ 300,000 $ 325,000 $ 400,000
Difference
Taxable income (loss) 300,000 325,000 400,000 (480,000)
Rate 35% 30% 30% 29%
Income tax $ 105,000 $ 97,500 $ 120,000

NOL Schedule
Taxable income $ 300,000 $ 325,000 $ 400,000 (480,000)
Carryback (325,000) (155,000) 480,000
Taxable income 300,000 - 245,000 -
Rate 35% 30% 30% 29%
Income tax (revised) $ 105,000 $ - $ 73,500 -

Refund $ 97,500 $ 46,500 $144,000

Advance slide in presentation
19-68
mode to reveal answers.
LO 8
 Accounting for Net Operating Losses
Illustration: 2012 2013 2014 2015
NOL Schedule
Taxable income $ 300,000 $ 325,000 $ 400,000 (480,000)
Carryback (325,000) (155,000) 480,000
Taxable income 300,000 - 245,000 -
Rate 35% 30% 30% 29%
Income tax (revised) $ 105,000 $ - $ 73,500 -

Refund $ 97,500 $ 46,500

Journal Entry for 2015

Income Tax Refund Receivable 144,000

Benefit Due to Loss Carryback 144,000

19-69 LO 8
 Accounting for Net Operating Losses
carryback - carryforward
Illustration: Rode Inc. incurred a net operating loss of $500,000
in 2014. Combined income for 2012 and 2013 was $350,000. The
tax rate for all years is 40%. Rode elects the carryback option.
Prepare the journal entries to record the benefits of the loss
carryback and the loss carryforward.

19-70 LO 8
 Accounting for Net Operating Losses

Illustration: 2012-2013 2014 2015

Financial income $ 350,000
Difference
Taxable income (loss) 350,000 (500,000)
Rate 40% 40%
Income tax $ 140,000

NOL Schedule
Taxable income $ 350,000 (500,000)
Carryback (350,000) 350,000
Taxable income - (150,000)
Rate 40% 40%
Income tax (revised) $ - (60,000)

Advance slide in presentation

19-71
mode to reveal answers.
LO 8
 Accounting for Net Operating Losses

Illustration: 2012-2013 2014 2015

Financial income $ 350,000
Difference
Taxable income (loss) 350,000 (500,000)
Rate 40% 40%
Income tax $ 140,000

NOL Schedule
Journal Entries for 2014
Taxable income $ 350,000 (500,000)
Income Tax Refund Receivable
Carryback (350,000) 140,000
350,000
Taxable income
Benefit Due to Loss Carryback - (150,000) 140,000
Rate 40% 40%
Income tax (revised) $ - (60,000)

19-72 LO 8
 Accounting for Net Operating Losses

Illustration: 2012-2013 2014 2015

NOL Schedule
Taxable income $ 350,000 (500,000)
Carryback (350,000) 350,000
Taxable income - (150,000)
Rate 40% 40%
Income tax (revised) $ - (60,000)

Journal Entries for 2014

Deferred Tax Asset 60,000

Benefit Due to Loss Carryforward 60,000

19-73 LO 8
 Accounting for Net Operating Losses

Illustration: Rode Inc. incurred a net operating loss of $500,000

in 2014. Combined income for 2012 and 2013 was $350,000. The
tax rate for all years is 40%. Rode elects the carryback option.
Assume that it is more likely than not that the entire net operating
loss carryforward will not be realized in future years. Prepare all
the journal entries necessary at the end of 2014.

19-74 LO 8
 Accounting for Net Operating Losses

Journal Entries for 2014

Income Tax Refund Receivable 140,000

Benefit Due to Loss Carryback 140,000

Deferred Tax Asset 60,000

Benefit Due to Loss Carryforward 60,000

Benefit Advance
Due to Loss
slide Carryforward 60,000entry to
in presentation mode to reveal journal
recognize the valuation allowance.
Allowance for Deferred Tax Asset 60,000

19-75 LO 8
 Accounting for Net Operating Losses
Carryforward (versi PSAK 46?)

Illustration: Rode Inc. incurred a net operating loss of $500,000 in

2012. Combined income for 2013 and 2014 are $350,000 each.
The tax rate for all years is 40%. Rode elects the carryforward
option. Prepare all the journal entries necessary at the end of 2013
and 2014.

Journal Entries for 2012

Deferred Tax Asset 200,000
Benefit Due to Loss Carryforward 200,000

19-76 LO 8
 Accounting for NOL Carryforward
(versi PSAK 46?)

Illustration: 2012 2013 2014

NOL Schedule
Taxable income $ (500,000) 350,000 350,000
Carryforward 500,000 (350,000) (150,000)
Taxable income - - 200,000
Rate 40% 40% 40%
Income tax (revised) $ - - 80,000
Journal Entries for 2013
Tax expense 140,000
Deferred tax assets 140,000

Journal Entries for 2014

Tax expense 140,000
Deferred tax assets 60,000
19-77 Tax payable 80.000
 Accounting for Net Operating Losses

Valuation Allowance Revisited

Whether the company will realize a deferred tax asset depends on
whether sufficient taxable income exists or will exist within the
carryforward period. Illustration 19-37
Possible Sources of
Taxable Income

19-78 LO 8
 Valuation Allowance Revisited Illustration 19-38
Evidence to Consider in
Evaluating the Need for
a Valuation Account

Valuation Allowance Revisited

19-79 LO 8
19-80 LO 8
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-81
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Financial Statement Presentation

Balance Sheet
An individual deferred tax liability or asset is classified as
current or noncurrent based on the classification of the related
asset or liability for financial reporting purposes.

Companies should classify deferred tax accounts on the

balance sheet in two categories:
 one for the net current amount, and
 one for the net noncurrent amount.

19-82 LO 9
 Balance Sheet ILLUSTRATION 19-39
Classification of
Temporary Differences
as Current or Noncurrent

19-83 LO 9
 Financial Statement Presentation

Income Statement
Companies should allocate income tax expense (or benefit) to
continuing operations, discontinued operations, extraordinary
items, and prior period adjustments.
Companies should disclose the significant components of
income tax expense attributable to continuing operations
(current tax expense, deferred tax expense, etc.).

19-84 LO 9
 Accounting for
19 Income Taxes

LEARNING OBJECTIVES
After studying this chapter, you should be able to:

1. Identify differences between pretax 6. Describe various temporary and

financial income and taxable income.
2. Describe a temporary difference that
results in future taxable amounts.
3. Describe a temporary difference that
results in future deductible amounts.
4. Explain the purpose of a deferred tax
asset valuation allowance.
5. Describe the presentation of income tax
expense in the income statement.
19-85
permanent differences.
7. Explain the effect of various tax rates and
tax rate changes on deferred income
taxes.
8. Apply accounting procedures for a loss
carryback and a loss carryforward.
9. Describe the presentation of deferred
income taxes in financial statements.
10. Indicate the basic principles of the asset-
liability method.
 Review of the Asset-Liability Method

The FASB believes that the asset-liability method (sometimes

referred to as the liability approach) is the most consistent
method for accounting for income taxes. Illustration 19-42
Basic Principles of the
Asset-Liability Method

19-86 LO 10
 Review of the Asset-Liability Method

Illustration 19-43
Procedures for Computing
and Reporting Deferred
Income Taxes

19-87 LO 10
 Kerangka Beban Pajak
Paragraf 5

Beban Pajak.

Pajak Kini. Pajak Tangguhan.

Aset Pajak Tangguhan. Liabilitas Pajak

Tangguhan.

Akibat perbedaan Akibat kompensasi Akibat perbedaan

temporer yang dapat kerugian. temporer kena pajak.
dikurangkan.
88
 ILUSTRASI

 Entitas A membeli mesin senilai 10.000 2/1/X1. Mesin

menurut akuntansi didepresiasikan selama 5 tahun,
tanpa nilai sisa.
 Untuk tujuan pajak mesin termasuk kelompok 1
didepresiasikan selama 4 tahun.
 Misalkan penghasilan entitas sebesar 7.000 beban
operasi selain depresiasi 2.000.
 Ilustrasi perbedaan pajak dan akuntansi serta
jurnalnya dapat dilihat dalam slide berikut ini.

89
 ILUSTRASI

 Depresiasi menurut akuntansi 10.000/5=2.000

AKUNTANSI
20X1 20X2 20X3 20X4 20X5
Pendapatan 7.000 7.000 7.000 7.000 7.000
Bbn Operasi 2.000 2.000 2.000 2.000 2.000
Bbn Penyusutan 2.000 2.000 2.000 2.000 2.000
Total Beban 4.000 4.000 4.000 4.000 4.000
Laba sblm pajak 3.000 3.000 3.000 3.000 3.000
Beban Pajak (akt) 750 750 750 750 750
Laba setelah pajak 2.250 2.250 2.250 2.250 2.250

90
 ILUSTRASI

 Depresiasi menurut pajak 10.000/4=2.500

PAJAK
20X1 20X2 20X3 20X4 20X5
Pendapatan 7.000 7.000 7.000 7.000 7.000
Bbn Operasi 2.000 2.000 2.000 2.000 2.000
Bbn Penyusutan 2.500 2.500 2.500 2.500
Total Beban 4.500 4.500 4.500 4.500 2.000
Penghasilan kena pajak 2.500 2.500 2.500 2.500 5.000
Pajak terutang 625 625 625 625 1.250

91
 ILUSTRASI

20X1 20X2 20X3 20X4 20X5

AKUNTANSI
Laba sblm pajak 3.000 3.000 3.000 3.000 3.000
Beban Pajak (akt) 750 750 750 750 750
PAJAK
Penghasilan kena pajak 2.500 2.500 2.500 2.500 5.000
Pajak terutang 625 625 625 625 1.250
Perbedaan
Perbedaan laba 500 500 500 500 (2.000)
Perbedaan pajak 125 125 125 125 (500)
Kewajiban pajak tangguhan 125 250 375 500 0
Beban pajak (L/R)
Beban pajak kini 625 625 625 625 1.250
Beban pajak tangguhan 125 125 125 125 (500)
Total beban pajak 750 750 750 750 750
92
 ILUSTRASI

 Jurnal yang dibuat pada saat 20X1 – 20X4

Beban pajak tangguhan 125
Liabilitas pajak tangguhan 125

 Jurnal yang dibuat pada 20X5

Liabilitas pajak tangguhan 500
Pendapatan pajak tangguhan 500

 Pada awal tahun 2005, liabilitas pajak tangguhan

terakumulasi sebesar 500.
 Pada akhir tahun 2005, setelah depresiasi dicatat,
perbedaan menjadi tidak ada, sehingga liabilitas pajak
tangguhan nilainya 0

93
 ILUSTRASI – nilai sisa

 Entitas A membeli mesin senilai 12.000 pada 2/1/X1.

Mesin menurut akuntansi didepresiasikan selama 5
tahun, tanpa dengan nilai sisa 2000.
 Untuk tujuan pajak mesin termasuk kelompok 1
didepresiasikan selama 4 tahun.
 Misalkan penghasilan entitas sebesar 7.000 beban
operasi selain depresiasi 2.000.
 Mesin tersebut tahun 20X6 masih digunakan dan
pada awal 20X7 dijual dengan harga 3000
 Ilustrasi perbedaan pajak dan akuntansi serta
jurnalnya dapat dilihat dalam slide berikut ini.

94
 ILUSTRASI – nilai sisa

 Depresiasi menurut akuntansi (12.000-2000)/5=2.000

AKUNTANSI
20X1 20X2 20X3 20X4 20X5 20X6 20X7
Pendapatan 7.000 7.000 7.000 7.000 7.000 7.000 7.000
Keuntungan mesin 1.000
Bbn Operasi 2.000 2.000 2.000 2.000 2.000 2.000 2.000
Bbn Penyusutan 2.000 2.000 2.000 2.000 2.000
Total Beban 4.000 4.000 4.000 4.000 4.000 2.000 2.000
Laba sblm pajak 3.000 3.000 3.000 3.000 3.000 5.000 6.000
Beban Pajak (akt) 750 750 750 750 750 1.250 1.500
Laba setelah pajak 2.250 2.250 2.250 2.250 2.250 3.750 4.500

95
 ILUSTRASI – nilai sisa

 Depresiasi menurut pajak 10.000/4=2.500

PAJAK
20X1 20X2 20X3 20X4 20X5 20X6 20X7
Pendapatan 7.000 7.000 7.000 7.000 7.000 7.000 7.000
Keuntungan mesin 3.000
Bbn Operasi 2.000 2.000 2.000 2.000 2.000 2.000 2.000
Bbn Penyusutan 3.000 3.000 3.000 3.000
Total Beban 5.000 5.000 5.000 5.000 2.000 2.000 2.000
Penghasilan kena pajak 2.000 2.000 2.000 2.000 5.000 5.000 8.000
Pajak terutang 500 500 500 500 1.250 1.250 2.000
Penghasilan stlh pajak 1.500 1.500 1.500 1.500 3.750 3.750 6.000

96
 ILUSTRASI – nilai sisa

20X1 20X2 20X3 20X4 20X5 20X6 20X7

AKUNTANSI
Laba sblm pajak 3.000 3.000 3.000 3.000 3.000 5.000 6.000
Beban Pajak (akt) 750 750 750 750 750 1.250 1.500
PAJAK
Penghasilan kena pajak 2.000 2.000 2.000 2.000 5.000 5.000 8.000
Pajak terutang 500 500 500 500 1.250 1.250 2.000
Perbedaan
Perbedaan laba 1.000 1.000 1.000 1.000 -2.000 0 -2.000
Perbedaan pajak 250 250 250 250 -500 0 -500
Kewajiban pajak tangguhan 250 500 750 1.000 500 500 0
Beban pajak (L/R)
Beban pajak kini 500 500 500 500 1.250 1.250 2.000
Beban pajak tangguhan 250 250 250 250 -500 0 -500
Total beban pajak 750 750 750 750 750 1.250 1.500

97
 ILUSTRASI

 Jurnal yang dibuat pada saat 20X1 – 20X4

Beban pajak tangguhan 250
Liabilitas pajak tangguhan 250
 Jurnal yang dibuat pada 20X5
Liabilitas pajak tangguhan 500
Pendapatan pajak tangguhan 500
 Jurnal yang dibuat pada 20X7
Liabilitas pajak tangguhan 500
Pendapatan pajak tangguhan 500
 Pada awal tahun 2005, liabilitas pajak tangguhan terakumulasi
sebesar 1000.
 Pada akhir tahun 2005, setelah depresiasi dicatat, perbedaan
direaliasasi 500, sehingga liabilitas pajak tangguhan nilainya 500
 Perbedaan ini akan hilang pada saat aset tersebut terjual di
tahun 2007. Pajak mengakui keuntungan 3.000 akuntansi 1.000

98
 ILUSTRASI – kerugian fiskal

 Entitas A pada tahun 20x1 mengalami kerugian fiskal 8.000

(diasumsikan kerugian akuntansi nilainya sama).
 Pada 20x2 entitas laba 2.000, 20x3 laba 3.000 dan 20x4 laba
sebesar 5.000.
 Tidak terjadi perbedaan akuntansi dan pajak

20X1 20X2 20X3 20X4

Laba akuntansi (8.000) 2.000 3.000 5.000
Beban pajak kini - - - 500
Beban pajak tangguhan (2.000) 500 750 750
Total beban pajak (2.000) 500 750 1.250
Laba setelah pajak (6.000) 1.500 2.250 3.750
Aset pajak tangguhan 2000 Beban pajak tangguhan 750
Pendapatan pajak tangguhan 2.000 Aset pajak tangguhan 750
Beban pajak tangguhan 500 Beban pajak tangguhan 750
Aset pajak tangguhan 500 Beban pajak kini 500
Aset pajak tangguhan 750
99
Utang pajak kini 500
 Implikasi – Properti Investasi

 Sewa Tanah dan bangunan dikenakan pajak

final.
 Beban depresiasi tidak boleh diakui.
• Sebuah bangunan senilai 500 juta disewakan selama 10
tahun dengan sewa 40 juta per tahun. Depresiasi 20 tahun
garis lurus nilai sisa 0.
• Bagamana dampak pajaknya secara akuntansi??

100
 Implikasi – Model Revaluasi

 Dibeli mesin pabrik sebesar 400 juta 10 tahun lalu, pada

tahun 2008 nilai buku tinggal 200 juta, direvaluasi
menjadi 300 juta, sehingga akan muncul selisih revaluasi
100 juta. Asumsikan perusahaan mendepresiasikan
selama 20 tahun, sehingga masih 10 tahun tersisa.

Mesin 100
Surplus Revaluasi 100
Beban pajak tangguhan OCI 25
Kewajiban pajak tangguhan 25

101
 Implikasi – Model Revaluasi

Depresiasi
Beban Depresiasi 20
Akumulasi Depresiasi 20

Beban pajak tangguhan OCI 2,5

Saldo laba 7,5
Surplus revaluasi 10
(pajak atas OCI harus dilaporkan )

Kewajiban pajak tangguhan 2,5

Beban pajak tangguhan (current) 2,5
(karena depresiasi yang berbeda dan diakui dalam laba rugi)

102