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Establishing a Subsidiary as a Corporation

In: Business and Management

Submitted By rmhenry72
Words 1198
Pages 5
The purpose of this memo is to help explain why a subsidiary would be set up as a corporation.
When looking into deferred taxes, it is imperative to look into what the Financial Accounting Standards Board (FASB) has to say about the subject. " deferred tax liability is recognized for temporary differences that will result in net taxable amounts in future years." ("Financial Accounting Standards Board," n.d.). More simply stated deferred tax is a tax that is paid at a later period (ex. income tax, capital gains tax) which when the taxable item is obtained. An example of deferred taxes and the methodology used to determine them would be a 401k plan. The moneys are paid into the plan, and the taxes are not due until the money is withdrawn.
Reporting accounting changes and error corrections is a process governed by the Financial Accounting Standards Board (FASB). The first thing to keep in mind is that an error is not the same thing as a correction. An accounting error is "Quantitative error caused by negligence or misapplication of accounting policies and/or the provisions of GAAP; any accounting mistake except fraud.” ("Businessdictionary.com", 2014). An accounting change is “Alterations or modifications that affect (1) accounting methods (such as a new depreciation schedule, or changeover from cash basis accounting to accrual basis accounting, or vice versa), (2) accounting estimates (such as earnings shortfall or amount of bad debts), or (3) accounting entity (such as after a merger or takeover). Accounting changes must be disclosed in the notes (footnotes) accompanying financial statements.” ("Businessdictionary.com", 2014). The FASB has guidelines in which to help an organization report accounting changes a method that may be used to report accounting changes within the organization, with the help of a CPA, is retrospective perspective. Retrospective

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