Corporation tax-income tax-financial statement, Financial Accounting

Corporation Tax

This is the tax payable by companies on their trading activities of a given financial period. The standard doesn’t give the guidelines on how this tax should be computed because the corporation tax is based on the rules and procedures of a country with regards to tax matters.

However, once this tax has been computed then the standard gives the guidelines on how it should be treated in the financial statements.

IAS 12 requires that income tax should be shown as a separate item on the face of the income statement and described as “Income tax expense”. If part of this amount remains unpaid, then it should be shown as part of current liabilities in balance sheet and described as “Current tax”.

In practice, it may be difficult for a company to know exactly how much tax should be paid in relation to a given financial period. Therefore, many companies use an estimate for the purpose of completion of the accounts.

In the subsequent financial period, the amount actually payable would be confirmed with the tax authorities and the firm may be required to pay either more than or less than what was actually provided for.

The ‘the more than’ or ‘less than’ tax is called on under or over provision of previous years tax.

IAS 12 requires that under or provision of previous year’s tax should be adjusted for in the period in which it arises and thus the company shouldn’t adjust its previous year’s financial statements.

An underprovision of previous years tax will thus be added to the current years income tax expense and over provision of previous years tax will be deducted from the current years income tax expense and eventually the net amount shown as the income tax expense in the income statement.

Posted Date: 12/12/2012 12:27:39 AM | Location : United States







Related Discussions:- Corporation tax-income tax-financial statement, Assignment Help, Ask Question on Corporation tax-income tax-financial statement, Get Answer, Expert's Help, Corporation tax-income tax-financial statement Discussions

Write discussion on Corporation tax-income tax-financial statement
Your posts are moderated
Related Questions
agency conflicts and solutions in shareholders vs auditors

Preferential debts These are almost the same as in bankruptcy; with the addition that any person who has advanced money for the payment of wages has the same priority as the pe

Is there two type of way to do balance sheet?

Since 1968, Dracula Limited has traded in Doncaster, South Yorkshire as a manufacturer of fancy-dress and theatrical costumes. It produces a wide range of general theatrical costum

Construct the Market Value Balance Sheet XYZ, Inc., another company founded by Larry Davidson in 2005, is currently entirely equity financed. That means the company carries no

Describe:-1. Compare the American Institute of CPAs' (AICPA) Statements on Tax Standards (SSTS) and the Treasury Department Circular 230 rules to practice before the Internal Reven

Monte and Allie each own 50% of Raider Corporation, an S corporation. Both individuals actively participate in Raider's business. On January 1, Monte and Allie have adjusted bases

Sigma is thinking about purchasing a new clam digger for $14,000. The expected net cash flows resulting from the digger are $9,000 in year 1, $7,000 in year 2, $5,000 in year 3, an

A summary of Jarvis Company's December 31, 2013, accounts receivable aging schedule is presented below along with the estimated percent uncollectible for each age group: Age Gro