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
Suppose that the risk-free rate is 7% and that the market risk premium is 7%. What is the needed rate of return on a stock with a beta of 1.2? What is the needed rate of retu

Limited Liability Company (LLC) - Form of doing business combining limited liability for all owners (known as members) with taxation as a PARTNERSHIP. An LLC is formed by filing AR

#define stock exchange? mention the SEBI guideline pertaining to the functioning of stock exchange? question..

Given information: Offered a $20 million commercial loan priced using a 3month LIBOR index+100bp. After some preliminary research, using a money center bank''s swap trading desk

Ely purchased a patent (with a remaining legal life of ten years) from Backo on January 1, 2010 for $300,000. Ely expected to use the patent for five years. The carrying value on B

1. When preparing the operating activities section of the statement of cash flows using the indirect method, a decrease in accounts recievable is subtracted from net income. True o

disscuss the applicability of a operating cycle in vegetable growing bussiness in uganda

The following information is for the third quarter of this year:   Planned Actual   Production 92,000 units

Determine the Range and quality of information Financial accounting reports concentrate on information which can be quantified in monetary terms. Management accounting addition

What is Acid-test ratio A measurement of the capability of a business to meet its short-term commitments. It is considered by dividing excluding stock, current assets, by curre