Deferred Taxation Essay Example | Topics and Well Written Essays - 1500 words

Deferred Taxation - Essay Example Such differences only impact on the taxation computation of one period. Deferral method is where the tax effects of current timing differences are deferred and allocated to future periods when the timing differences reverse. Since deferred tax balances in the balance sheet are not considered to represent rights to receive or obligations to pay money, they are not adjusted to reflect changes in the tax rate or the imposition of new taxes. Under the deferral method, the tax expense for a period comprises of provision for taxes payable and the tax effects of timing differences deferred to or from other periods. Liability Method is where the expected tax effects of current timing differences are determined and reported either as liabilities for taxes payable in the future or as assets representing advance payment of future taxes. Deferred tax balances are adjusted for changes in the tax rate or for new taxes imposed. The balances may also be adjusted for expected future changes in tax rates. Under the liability method, the tax expense for a period comprises of the provision for taxes payable, the amount of taxes expected to be payable or considered to be prepaid in respect of timing differences originating or reversing in the current period and the adjustments to deferred tax balances in the balance sheet necessary to reflect either a change in the tax rate or the imposition of new taxes. 3. Nil provision, partial provision and full provision Nil provision is where no provisions are made for deferred tax whatever the circumstances. This is based on the principal that only the tax that is deemed to be payable in respect of a period should be accounted for in the financial statements. Full provision is where the tax effects of all timing differences are recognized as and when they arise. Although this method is arithmetically accurate it can lead to the building up of large meaningless provisions in the balance sheet. Partial provision lies between the two extremes stated above. Deferred tax should be accounted for in respect of the net amount by which it is probable that any payment of tax will be temporarily deferred by the operation of timing differenced, which will reverse in the foreseeable future without being replaced. 4. Discounting Discounting deferred tax assets and liabilities enables to reflect the time value of money. IAS 12 does not permit discounting due to the difficulty in ascertaining the timing of reversal of each temporary difference B) Critically assess the current IAS 12 requirements for accounting for deferred tax Deferred tax is an accounting term, meaning future tax liability or asset, resulting from temporary differences between book (accounting) value of assets and liabilities, and their tax value. This arises due to differences between accounting for shareholders and tax accounting. Deferred tax arises when the actual tax as a result of a particular transaction (tax payable or recoverable) arises in a different period from the period in which the transaction is included in the financial statements. The provision for taxes payable is calculated in accordance with rules for determining taxable income established by taxation authorities. In many circumstances these rules differ from the accounting policies applied to determine accounting income. The effect of this

Pro and Con Essay Example | Topics and Well Written Essays - 500 words

Pro and Con - Essay Example Eventually, this contributed to the health of the USA’s economy. It is vital to note that the author critiqued the lack of flexibility of the reform act as regards the control of immigration. The second article argues that illegal immigrants should not attain legal status in particular countries. He states that USA can attain lessons from Europe in terms of granting amnesty to illegal immigrants. Paul Belien, the author, argues that several European countries accorded legal status to illegal immigrants in the 2000’s. Countries, such as Italy and France, opened the floodgates for more immigrants that became unmanageable. This is because many undiscovered immigrants showed up for certification. In the analysis of Hinojosa article, it is vital that he provides three perspectives to the same. The first two arguments props the authors’ view of providing legal status to immigrants. The third article highlights the loophole of the IRCA act of 1987. The first argument highlights that legalized immigrants progress more economically. It is vital to note that the paper provided statistics, from the labor department, to prop this position. The hourly wages of legal immigrants had at increased at an average rate of 15.1 percent from 1987 to 1992 (Hinojosa-Ojeda 2). In the same period, the female immigrants had improved their wages at a rate of 20.5 percent. On the other hand, there had been an increase of 13.2 percent. These statistics correlated with the fact that a percentage of 38, of Mexican men, had adjusted to better-paying occupations. The paper argues that this translates to economic progress because the immigrants possess better bargaining powers (Belien 22). However, it only stresses on the economic benefits such as businesses, income and houses. This contributes to overall economic progress in terms of tax revenues for the government. It is crucial to note that the paper is comprehensive in noting that the IRCA act did not provide policies for managing