investment tools financial statement analysis liabilities

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1、十InvestmentTools:FinancialStatementAnalysis:Liabilities1.A:AnalysisofIncomeTaxesa:Definethekeytermsusedinaccountingforincometaxes.Taxreturnterminology:1.Taxableincome:IncomebaseduponIRSrulesthatdeterminetaxesdue.2.Taxespayable:Thetaxesduethegovernmentdeterminedbytaxableincomean

2、dthetaxrate.Thisisalsoreferredtoas“currenttaxexpenseorbenefit”.3.Incometaxpaid:Actualcashflowforincometaxes,includingpaymentsorrefundsforotheryears.4.Taxlosscarryforward:Thecurrentnettaxablelossthatisusedtoreducetaxableincome(thustaxespayable)infutureyears.Financialreportingter

3、minology:1.Pretaxincome:Incomebeforeincometaxexpense.2.Incometaxexpense:Theexpenserecognizedonfinancialstatementsthatincludestaxespayableanddeferredincometaxexpense.Thusincometaxexpenseisnotjustwhatisowedasindicatedonthetaxreturns.3.Deferredincometaxexpense:Thedifferenceinincom

4、etaxexpenseandtaxespayablethatresultsfromchangesindeferredtaxassetsandliabilities.Eachindividualdeferreditemisexpectedtobepaid(orrecovered)infutureyears.4.Deferredtaxasset:Balancesheetamountsrelatedtothedifferenceintaxexpenseandtaxespayablethatareexpectedtoberecoveredfromfuture

5、operations.5.Deferredtaxliability:Balancesheetamountsrelatedtothedifferenceintaxexpenseandtaxespayablethatareexpectedtoresultinfuturecashoutflow.6.Valuationallowance:Reserveagainstdeferredtaxassetsbasedonthelikelihoodthatthoseassetswillberealized.7.Timingdifference:Resultsfroma

6、transactionbeingtreateddifferently(timingoramount)onthetaxreturnandfinancialstatements.8.Temporarydifference:Differencesbetweentaxandfinancialreportingthatwillaffecttaxableincomewhenthosedifferencesreverse.Slightlybroaderthantimingdifferences.b:Explainwhyandhowdeferredtaxliabil

7、itiesandassetsarecreated.Adeferredtaxassetoccurswhentaxableincomeexceedspretaxincomeandthisdifferencewillreverseinthefuture.Forexample,pretaxincomeincludesanaccrualforwarrantyexpensebutwarrantycostisnotdeductiblefortaxableincomeuntilthefirmhasmadeactualexpenditurestomeetwarrant

8、yclaims.Example:Letafirmhavesalesof$5,000foreachoftwoy