Discussion:Deferred taxes & tax accruals
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| {{ForumReplyPost|UserID=Dennis|Date=26 April 2006|Text=Isn't there this big convergence project to determine what 109 actually means? My opinion in this matter is most spectacularly worthless, but assuming that the deferred tax liability represents the difference between actual taxes paid and taxes computed as payable on GAAP income there has to be a charge to retained earnings and it makes a lot more sense to reflect that charge as at 12/31/05.}} | {{ForumReplyPost|UserID=Dennis|Date=26 April 2006|Text=Isn't there this big convergence project to determine what 109 actually means? My opinion in this matter is most spectacularly worthless, but assuming that the deferred tax liability represents the difference between actual taxes paid and taxes computed as payable on GAAP income there has to be a charge to retained earnings and it makes a lot more sense to reflect that charge as at 12/31/05.}} | ||
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| + | {{ForumReplyPost|UserID=Foxttron|Date=26 April 2006|Text=You may need to true-up a lot of temporary accounts on the last FS of the C corp. it may be an exercise. Think about all the tax consequences of an S Election.}} | ||
Revision as of 13:22, 26 April 2006
Discussion Forum Index --> Tax Questions --> Deferred taxes & tax accruals
Frostyinmo (talk|edits) said: | 25 April 2006 |
| I am auditing a very profitable C Corp with a fiscal year end. They are making the switch to an S Corp this year. Should I still be concerned with deferred taxes and tax accruals on the final fiscal year end audited books, knowing that they are not going to be accounted for in the future?
Furthermore, if I should book these accruals, how do I get them off the books when the company becomes an S Corp? Am I going to debit/credit an expense account or take the adjustment directly to Retained Earnings or even AAA? Thanks! | |
| 25 April 2006 | |
| I think you're in the wrong forum looking for answers to GAAP questions here. I have not done GAAP financial statements in a long while, so for the deferred tax question you need to look at the FASB's. You may also want to call the AICPA Technical Hotline (I don't know if this number is still current since it has been in my Rolodex for years, but I have 800-832-4272 Dept 2) But here is my take, obviously given without any research.
Yes, the current and deferred taxes are still relevant for the y/e while the corp is still a C corp. You will need to add a subsequent event footnote disclosure pertaining to the S election which occurred after y/e. (I suppose it is possible that the election was done prior to y/e, but most likely not). The current tax liability should go away once the taxes are paid for the final year as a C corp. I'm guessing (again without opening a FASB to back up my guess) that the deferred tax liability in existance on the balance sheet date will be credited to deferred tax expense in the first year the S election becomes effective. Hope that helps. (Worth what you paid for it :) | |
| 26 April 2006 | |
| Saw this very subject discussed on another forum
answer went as follows: (but don't ask me .. I am a tax accountant.. not an financial auditor) they concluded it though the income statement: ____________________________ FAS 109 is effective for fiscal years beginning after 12/15/1992. See Par. 45 a. - Current expense or benefit. FAS 109, Par. 112 - "A change in tax law or rate or a change in the tax status of an enterprise is an event that has economic consequrences for an enteprise in the year that the change occurs, that is, in the year that a change in tax law or rate is enacted or a change in status approved." _____________________________________________________ | |
| 26 April 2006 | |
| Isn't there this big convergence project to determine what 109 actually means? My opinion in this matter is most spectacularly worthless, but assuming that the deferred tax liability represents the difference between actual taxes paid and taxes computed as payable on GAAP income there has to be a charge to retained earnings and it makes a lot more sense to reflect that charge as at 12/31/05. | |
| 26 April 2006 | |
| You may need to true-up a lot of temporary accounts on the last FS of the C corp. it may be an exercise. Think about all the tax consequences of an S Election. | |
