Tax Base of a Company’s Assets and Liabilities
An asset’s tax base is the amount that will be deductible for tax purposes in future periods once the economic benefits of the asset have been realized and a company can recover its carrying amount. If the economic benefit will…
Creation of Deferred Tax Liabilities and Assets
A deferred tax asset arises whenever a company’s taxable income is greater than its accounting profit. This variance results in an excess amount being paid for income taxes, which the company expects to recover in the course of future operations….
Differences Between Accounting Profit and Taxable Income
Accounting profit also referred to as income before taxes is reported on a company’s income statement following the prevailing accounting standards. Taxable income is the portion of a company’s income that is subject to income taxes following the tax laws…
Effect of Finance Leases and Operating Leases on Financial Statements
Introduction In substance, a finance (or capital) lease is equivalent to the purchase of an asset by a buyer (or lessee) that is directly financed by the seller (or lessor). An operating lease is an agreement providing the lessee with…
Effects of Assets Leases on Financial Statements and Ratios
Introduction A lease is a contract between a lessor or owner of an asset, and a lessee, who is seeking to use the asset. In exchange for the right to the use of the assets, the lessee makes periodic lease…
Financial Reporting of Investment Property
IFRS defines investment property as property that is owned (or, in some cases, leased under a finance lease) to earn rentals or capital appreciation, or both. Cost Model and Fair Value Model IFRS allows companies to value investment properties either…
Property, Plant, Equipment, and Intangible Assets
Analysts can use disclosures to better their understanding of a company’s investments in tangible and intangible assets. To begin with, disclosures can enable analysts to tell how a company’s investments changed during a reporting period. In addition, disclosures reveal how…
Derecognition of Property, Plant, Equipment and Intangible Assets
Derecognition of an asset occurs whenever it is disposed of or it is not expected to generate any future benefits either from its use or disposal. As a result, the asset is removed from the financial statements. Disposal of a…
Describe the Revaluation Model
The revaluation model is an alternative to the cost model. It is used for the periodic valuation and reporting of long-lived assets. Whereas IFRS permits the use of either the revaluation model or the cost model, US GAAP doesn’t allow…
Choice of Amortization Method and Assumptions
The amortization expense, financial statements, and the ratios derived from them may be significantly impacted by a company’s selected amortization method and the accompanying assumptions and estimates. The Effect of the Choice of Amortization Method and Assumptions on Amortisation Expense,…
