...accrue and report the total tax benefit or taxes payable that will actually be realized or assessed on temporary differences when their respective future taxable or deductible amounts are expected to occur. The book states 5 arguments: 1. The balance sheet is becoming more important financial statement. Reporting deferred taxes based on the expected tax rates when the temporary differences reverse increases the predictive value of future cash flows, liquidity, and financial flexibility. 2. Reporting deferred taxes based on the expected tax rates is conceptually more sound because the reported amount represents either the likely future economic sacrifice (future tax payment) or economic benefit (future reduction in taxes). 3. Deferred taxes may be the result of historical transactions, but, by definition, they are taxes that are postponed and will be paid (or will reduce taxes) in the future at the future tax rates. 4. Estimates are used extensively in accounting. The use of estimated future tax rates for deferred taxes poses no more of a problem regarding verifiability and reliability than using, say, estimated lives for depreciation. 5. Because the tax expense results from changes in balance sheet values, its measurement is consistent with the SFAC No. 6 and SFAS No. 130 definitions of comprehensive income. Others may include: - Under the International Accounting Standards No. 12 “Accounting for Taxes on Income” only the liability method is allowed...
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...irregularities. Some of these including paying employees under the table, committing schemes, and tax fraud will be examined in this paper. The consequences of these actions will also be displayed through example. This paper will consider the motivations behind why these types of fraud occur. There are many areas in which those in business today attempt to cut corners and figure out ways to get around the system in order to make more money. These occurrences are usually illegal and considered fraud. Fraud is defined by Ferrell and Fraedrich as, any purposeful communication that deceives, manipulates, or conceals facts in order to create a false impression. Fraud is a crime and convictions may result in fines, imprisonment, or both (Ferrell, Fraedrich, 2013). There are many different kinds of fraud that can be committed, which include paying employees under the table, schemes, and tax irregularities. Some of these cases will be further examined in this paper. When examining these scenarios it is important to determine what some motivating factors are that affect individual’s decision to commit this type of fraud. When these factors can be identified it may be helpful in preventing such occurrences in the future and also could help individuals to avoid making these decisions in their personal lives. Also, it is important to note that there are consequences in place for individuals and businesses that choose to participate in this...
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...each structure along with the advantages and disadvantages of each type of business structure: the corporation, limited liability company (LLC), limited liability partnership (LLP), partnership, and sole proprietorship. The following will also explain the potential tax consequences of each structure. Corporation The third choice is a corporation; the creation of a corporation provides two structures, “C” corporation and an “S” corporation. They are similar structures, but have a few differences. The “S” corporation has restrictions on who the investors are and their number. In addition, they have differences in taxation, and both are the most difficult and expensive structures to form. Corporations have many investors, which take control of the company out of the hands of the owner; this provides extra opportunities for conflicts in decision-making. However, this type of structure has the advantages of limitless funding available from stockholders, and you will only have liability that is limited to your investment. LLC & LLP With a LLC, the number of partners is unlimited and you could have a sole-member LLC, and remain the sole owner. This structure is faces many of the same tax consequences as a partnership or sole proprietorship; if it is a one owner LLC it will be taxed as a sole proprietorship, an if it is an LLP it will be taxed as a partnership. Partnership The second option is a partnership; with this option, you have a couple of options general or...
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...income taxes for for-profit entities is subject to Australian Accounting Standard Board (AASB) 112 Income Taxes. In accounting for income tax, complying with tax-effect method involves the occurrence of tax consequences due to different treatments are applied for transactions and other events happened inside an entity for accounting and taxation purposes, namely current tax consequences and future tax consequences. The purpose of this report was to identify and analyze the reasoning behind the responsibility of exploration and development costs (E&D) for the creation of a deferred tax liability (DTL) and its treatments for both accounting and taxation purposes. Moreover, the analysis was performed with reference to case study of Gravatt Ltd., a company operating in the mining industry where its directors arguing on the disadvantages of applying tax-effect accounting standards of AASB 112 and rather not to comply with one. This report was not discussing only on the rationale behind deferred tax liabilities according to AASB Framework for the Preparation and Presentation of Financial Statements and AASB 112 Income Taxes, but also the comparison of the impact on information utility captured by the users of financial statements of Gravatt in case of recognizing and unrecognizing deferred tax liabilities to be reported on its annual reports. 2. Discussion 2.1 Deferred Tax Liabilities Deferred tax liabilities (DTL) can be defined as “the amounts of income taxes payable...
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...[pic] | | |IAS 12 INCOME TAXES | |HISTORY OF IAS 12 | |April 1978 |Exposure Draft E13 Accounting for Taxes on Income | |July 1979 |IAS 12 Accounting for Taxes on Income | |January 1989 |Exposure Draft E33 Accounting for Taxes on Income | |1994 |IAS 12 (1979) was reformatted | |October 1994 |Modified and Re-exposed as Exposure Draft E49 Income Taxes | |October 1996 |IAS 12 Income Taxes | |1 January 1998 |Effective date of IAS 12 (1996) | |October 2000 |Limited Revisions to IAS 12 | |1 January 2001 |Effective date of...
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...structures to choose from are limited liability company structure, sole proprietorship, partnerships, and corporation structures. Each one of these is different from each other and has their advantages and disadvantages, and there are also many different tax consequences for each one as well. A limited liability company structure is a great way to go if you have the monies upfront to form it and for the startup costs. This type of structure covers the owners from company debt to where their personal belongings would not be touched, but in the beginning it is very expensive to start up. So if you don’t have enough money to put in from your pocket this may not be a very good idea. For the tax consequences the profits will go through the owners, but not be taxed double for it. The owner here will also be able to participate in the company. A sole proprietorship is very easy to start up and they are not as regulated laws to follow as other structures are. You would also have complete control over the company and what happens. The negative part of this structure is the banks are very hesitant to lend money to start the company and then if something happens personal property can be sought after. Then for the tax consequences it is reported as individual so would go with your personal property as well. A partnership is where the company is owned by several people. The advantages to a partnership are that each partner contributes everything together for the organization and that...
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...The average rate at which an individual or corporation is taxed. The effective tax rate for individuals is the average rate at which their earned income is taxed. The effective tax rate for a corporation is the average rate at which its pre-tax profits are taxed. An individual's effective tax rate is calculated by dividing total tax expense by taxable income. For corporations, the effective tax rate is computed by dividing total tax expenses by the firm's earnings before taxes. The effective tax rate is the net rate a taxpayer pays if all forms of taxes are included and divided by taxable income. The effective tax rate is often a more accurate representation of a taxpayer's tax liability than its marginal tax rate. Two companies that are in the same marginal tax bracket, for example, may end up with different effective tax rates depending on their earnings. This occurs particularly with a progressive, or tiered, tax system, where different levels of income are taxed at different rates. For example, the first $100,000 of income may be taxed at 10%, and income between $100,001 and $500,000 might be taxed at a rate of 15%. The corporation's income is taxed at the various levels, and to determine the effective (or average) tax rate, the total tax is divided by the total taxable income The term effective tax rate has different meanings in different contexts. Generally its calculation attempts to adjust a nominal tax rate to make it more meaningful. It may incorporate econometric,...
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...How Taxes Affect Businesses The domino effect of these taxes, that can be considered as costs, is certain to be felt all over the country and negatively impact Puerto Rico economy and business competitiveness. These taxes hit especially small and midsize businesses that don’t have the in-house expertise. The impact, with no doubts, will take a toll. Affected firms will be facing an extreme disadvantage with their peers in other states and nations. Employees will feel the effect through lower wages, low jobs offer, retention of personnel and promotions. More imposing and augmentation in taxes will make it more difficult for entrepreneurs that are actually established in Puerto Rico to ignore the welcoming invitations from other states or countries that offer lower taxes rate. Business taxes affect business decisions and top management will have to come up with alternatives, which might be from increases in prices of goods (also another problem since it causes an accelerating inflation) and services to relocate their business somewhere else, the retention process, market competitiveness, among others. Since prices increases were mentioned before, it should be noted that the IVU tax of 7% has created a gap between the price paid by those who buy goods and the price that sellers perceive. As a consequence of this gap, demand for goods decreases since consumers’ habits might have to be adjusted to income and on the other hand, the market size (specially the industries...
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...Taxation On Cigarette Smoking Economics Essay In the following paper you will be able to see who is likely to be more affected by tax increases on cigarettes: all adults or young adults. You will also be able to see how we can reduce the effects of cancer by reducing the cost of other tobacco products. You will also see long term elasticity of demand for cigarette smoking and what does this mean for the likely impact of taxes on long-term cigarette use and do you think taxing can be effective in decreasing the use of alcohol? Explain your answer using economic theory The people that are mostly affected by the increases in tax on cigarettes according to Frank J. Chaloupka would be the youth and Adults. The single most consistent finding of many econometric studies of the issue of cigarettes price being increased would lead to a drop in smoking. The ten percent increase in cigarettes price would overall drop the consumption of cigarettes sales by fiver percent. (Chaloupka, p. 3) By increasing the price in cigarettes it would most likely affect the youth and young adults do to the price increase. According to Study in 1996 by Chaloupka and Grossman they confirmed the earlier studies that the are three times as sensitive to the price increase then the adults (Chaloupka, p. 4) because they don’t have money like adults would have. Over all with the tax increase we will see a decrease in overall sales of cigarettes. To have the great effect on reducing cancer from the use of tobacco...
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...in the 25%, 28%, 33%, and 35% tax brackets are subject to a 15% tax rate on dividends. * 26 U.S. Code § 861 - Income from sources within the United States * 26 U.S. Code § 3510 - Coordination of collection of domestic service employment taxes with collection of income taxes * 26 U.S. Code § 3401 - Definitions Analysis: This article helps the reader look beyond the impact of tax changes on output or revenues allowing us to gain further insight into how tax changes are transmitted to the economy and into possible differences between the two tax components; personal and corporate income tax. The authors point out that changes in taxes may impact on costs of production and may affect inflation, to the extent that cost changes are passed into prices. There are important differences in how personal and corporate income tax changes affect the labor market. Studies that focus exclusively on total average tax rates or revenues are therefore only of limited use for assessing the ability of tax policy to affect employment at various horizons. When the prime policy objective is to create jobs relatively fast, cuts in personal income taxes are probably the best fiscal instrument. The employment effects of cuts in corporate taxes are more delayed and less certain. The studies above suggest that the same is true for government spending increases. This article has presented empirical results that support...
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...Philippine Tobacco Taxes Summary It is globally known that the Philippines is one of the most significant largest consumers of tobacco in the Western Pacific Region of the world. The high demand of tobacco use has constantly increased for many years and significant numbers of Filipino youth are smokers. In effect to the high levels of tobacco use, the Philippines had considerably facing adverse health issues and economic consequences from tobacco. With the current low tobacco product taxes and prices in the Philippines, significant increases in tobacco taxes will recline tobacco use and its harmful effects on health and economic consequences while directly generating new revenues. Tobacco Use and Its Consequences According to recent statistics, 30% of most adult Filipinos use some form of tobacco product, with 27.9% smoking manufactured cigarettes and 22.5% recorded daily smoking. Predominantly men smokes and about one in ten women are also tobacco users. The current population estimates, roughly 19 million adults consume tobacco in the Philippines. The socio-economic gradients in smoking prevalence are strong in the Philippines, coming from the lower socioeconomic sector two or more times as likely to smoke as those in higher socioeconomic sector. Tobacco use among the youth sector is a significant problem in the Philippines with 22.7% of 13 to 15 year olds in 2007 reporting using some tobacco product, and 17.5% reporting cigarette smoking. Tobacco use among girls has...
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...Three “If adolescent pregnancy prevention is to become a priority, then our strategy, as advocates, must contain two key elements: civic engagement and education”. The rate of teen pregnancy is growing dramatically because there are so many uneducated teens and they are careless of the consequences that come with unprotected sex. Teens do not think about the responsibility and problems that come with having a child. Parents can also play a role on why teen pregnancy has become more common these days. There are many ways to prevent teen pregnancy we just have to educate and make birth control options easily accessible to teens. Teen pregnancy can be prevented we just have to make an effort. Teens do not have the money to buy contraceptives to prevent pregnancy. Condoms and all types of birth control should be free and easily accessible to teens. We can raise taxes and the money raised from taxes can be used to provide free condoms at high schools, pharmacies, doctor’s offices, and liquor stores. Many hardworking tax payers may argue that they shouldn’t have to pay more taxes to help irresponsible teens but it’s better to pay less taxes on providing free contraceptives, than paying more taxes on supporting these teen parents that will most likely need government assistance which will be coming out of tax payers pockets. “Teen childbearing costs U.S. taxpayers billions of dollars due to lost tax revenue, increased public assistance payments, and greater expenditures for public...
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...Tobacco Taxation 1 Tobacco taxation is a hot topic and all 50 state governments have enacted taxes on cigarettes, and many have raised their taxes several times. Taxes on cigarettes are a way governments can achieve two social objectives; the first objective is to reduce the number of citizens who smoke. The government issuing the cigarette tax hopes that the rise in the cost of a pack of cigarettes will persuade people to quit smoking. The second objective is to raise government revenue. A cigarette tax, like any other tax, increases the amount of revenue governments can spend on social programs. Where there’s smoke, there’s taxes — especially for New Yorkers. In a 2010 budget move officials say will generate $440 million in revenue, the state legislature passed a bill that gave New York the highest cigarette tax in the country. On July 1, 2011 every pack sold in the state cost an extra $1.60, raising the total state tax to $4.35, pushing the average cost of a pack up to $9.20. For New York City residents, the cost of a pack will now come out to close to $11 — a $2 rise from just over a year ago. The $440 million in revenue will benefit health care programs, AIDS drugs subsidies, tobacco cessation programs and $71.6 million will go to the state cancer research center in Buffalo. Supporters also applaud the health benefits, saying it will reduce the number of smokers by tens of thousands of people. Tobacco consumption is the leading cause of preventable death in many...
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...Fundamentals of Macroeconomics James Ciminello ECO/372 May 8, 2013 William Thompson Fundamentals of Macroeconomics Part 1 - The following are terms used in macroeconomics. It is necessary to understand these terms when studying macroeconomics. All of these terms are according to W. W. Norton and Company, Inc. (n.d.), Gross Domestic Product (GDP) - “measures the total market value of all final goods and services produced in a country in a given year, plus exports, minus imports”. Real Gross Domestic Product – “the market value of final goods and services produced in an economy, measured in dollars adjusted for inflation”. Nominal Gross Domestic Product – “the value of gross domestic product in a particular year measured in that year’s prices”. Unemployment Rate – “the ratio of the number of people seeking employment to the total labor force”. Inflation Rate – “the rate of increase of the general level of prices”. Interest Rate – “the return a saver receives in addition to the original amount she deposited (loaned) and the amount a borrower must pay in addition to the original amount he borrowed”. Part 2 In the following examples it will be discussed how each affects government, households, and businesses. Additionally how the resources flow from one entity to another for each activity will be shown. Purchasing of groceries: When society purchases groceries it increases the demand for those particular items. An example would be if one was...
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...January 30th, 1:03 pm, 2013 in Taxes Effective financial planning for clients often has tax-related consequences, which in turn requires a good understanding of not only the tax laws themselves, but also the client's tax rates. Unfortunately, though, significant confusion abounds regarding what tax rates should be used when analyzing various problems. Is it the client's tax bracket? Or a marginal tax rate? Or an effective tax rate? When should each be used? The key is that in the end, marginal tax rates should be used to compare strategies, and effective tax rates should be used to compare people. Accordingly, if you want to know who commits a larger portion of their total income to their tax obligations, use an effective tax rate. But if you want to know whether to do that Roth conversion/IRA withdrawal/annuity investment/sale for a capital gain or loss/etc., the marginal tax rate is what should be used. In point of fact, this actually means that the marginal tax rate is really the only rate that should be used for financial planning scenarios! The caveat, however, is that in practice determining a client's marginal tax rate requires more than just looking at his/her tax bracket... so be certainly to calculate the marginal tax rate correctly, too! Marginal Tax Rates A marginal tax rate is the tax rate that will apply to the next marginal - or incremental - amount of income (or deductions). It is calculated by dividing the amount of additional taxes that will be due based on...
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