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HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION HI5020 Corporate Accounting Group Assignment T1 2020 Assessment Details and Submission Guidelines Trimester T1 2020 Unit Code HI5020 Unit Title Corporate...

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HOLMES INSTITUTE FACULTY OF HIGHER EDUCATION HI5020 Corporate Accounting Group Assignment T1 2020 Assessment Details and Submission Guidelines Trimester T1 2020 Unit Code HI5020 Unit Title Corporate Accounting Assessment Type Individual Assignment Assessment Title Accounting for Income Tax Purpose of the assessment (with ULO Mapping) This assignment aims at developing a clear understanding of students on corporate accounting for income tax issues. Students will develop an understanding on different concepts used in accounting for income tax. They will also develop an understanding on how different concepts of accounting for income tax are used by companies in the practical setting. (ULO 1, 2, 4, 5, 6). Weight 40 % of the total assessments (Written assignment 30 % + Presentation 10 percent) Total Marks Written assignment 30 marks + Presentation 10 marks Word limit 3000 words ±500 words Due Date Assignment submission: Final Submission of individual Assignment: 11:59 pm Friday, Week 10 Late submission incurs penalties of five (5) % of the assessment value per calendar day unless an extension and/or special consideration has been granted by the lecturer prior to the assessment deadline. Submission Guidelines  All work must be submitted on Blackboard by the due date along with a completed Assignment Cover Page.  The assignment must be in MS Word format, no spacing, 12-pt Arial font and 2 cm margins on all four sides of your page with appropriate section headings and page numbers.  Reference sources must be cited in the text of the report, and listed appropriately at the end in a reference list using Harvard referencing style. Page 2 of 6 HI5020 Corporate Accounting T1 2020 Assignment Specifications Purpose: This assignment aims at developing a clear understanding of students on corporate accounting for income tax issues. Students will develop an understanding on different concepts used in accounting for income taxes. They will also develop an understanding on how different concepts of accounting for income tax are used by companies in the practical setting. Assessment task: Collect the latest annual report of an ASX listed company for the last 2 financial years. Please read the financial statements (balance sheet, income statement, cash flow statement) and notes attached to financial statements on income tax issues very carefully. Please remember some aspects of your firm’s treatment of its tax – can be a very complicated area, particularly for some firms. Based on your understanding of the topic “accounting for income tax” and based on your reading of the collected annual reports, do the following tasks. i Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable temporary difference, deductible temporary difference, deferred tax assets and deferred tax liability. ii Briefly explain the recognition criteria of deferred tax assets and deferred tax liability. iii What is your firm’s tax expense in its latest financial statements? iv Is this figure the same as the company tax rate times your firm’s accounting income? Explain why this is, or is not, the case for your firm highlighting the reasons for differences. v Identify the deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded. vi Is there any current tax assets or income tax payable recorded by your company? Why is the income tax payable not the same as income tax expense? vii Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not, why is the difference? viii Briefly explain the concepts of temporary difference and permanent difference. Identify any permanent differences that your company may have. ix What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firm’s financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firm’s tax expense in its accounts? Assignment Structure should be as the following: Abstract - One paragraph List of Content Introduction Body of the assignment with detailed answer on each of the required tasks Summary/Conclusion List of references ….. Page 3 of 6 HI5020 Corporate Accounting T1 2020 Instruction for video presentation: Based on your written assignment you will have to make a summary video presentation ranging for 10 minutes. Your presentation should explain the assignment tasks and your key findings. You will have to upload the presentation in You Tube and submit the You Tube link in the black board so that the marker can watch and mark your presentation. Your assignment will be marked based on the following criteria: Presentation Style (3 marks) Content (4 marks) Clarity of the presentation ((3 marks) Excellent XXXXXXXXXXVery good XXXXXXXXXX1.75 Good XXXXXXXXXX XXXXXXXXXXSatisfactory XXXXXXXXXX XXXXXXXXXXUnsatisfactory XXXXXXXXXX0 Marking criteria Marking criteria Weighting Abstract 1% List of content & overall presentation of the assignment 1% Introduction 1% Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable temporary difference, deductible temporary difference, deferred tax assets and deferred tax liability. Provide suitable example for each concept. 7% Briefly explain the recognition criteria of deferred tax assets and deferred tax liability. 2% What is your firm’s tax expense in its latest financial statements? 1% Is this figure the same as the company tax rate times your firm’s accounting income? Explain why this is, or is not, the case for your firm highlighting the reasons for differences. 3% Identify the deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded. 3% Is there any current tax assets or income tax payable recorded by your company? Why is the income tax payable not the same as income tax expense? 3% Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not why is the difference? 3% Briefly explain the concepts of temporary difference and permanent difference. Identify any permanent differences that your company may have. 2% What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firm’s financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firm’s tax expense in its accounts? 2% Conclusion 1% Total in Written Assignment 30% Video presentation 10% Total 40 % Page 4 of 6 HI5020 Corporate Accounting T1 2020 Marking Rubric Excellent Very Good Good Satisfactory Unsatisfactory Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable temporary difference, deductible temporary difference, deferred tax assets and deferred tax liability. /7 All seven concepts have been discussed clearly and comprehensively . Suitable examples have been given All seven concepts have been discussed. Suitable examples have been given. Has discussed all seven concepts with examples. Minor errors remain. Attempted to discuss all seven concepts. Also attempted to provide examples. Major errors remain. Did not show an understanding of the concepts, did not provide appropriate examples. Briefly explain the recognition criteria of deferred tax assets and deferred tax liability. /2 The recognition criteria of deferred tax assets and deferred tax liability have been correctly and comprehensively discussed The recognition criteria of deferred tax assets and deferred tax liability have been discussed. There is scope for improvement. The recognition criteria of deferred tax assets and deferred tax liabilities have been discussed with minor errors and ambiguity. The recognition criteria of deferred tax assets and deferred tax liabilities have been discussed with major errors and ambiguity. An attempt has been made to discuss the recognition criteria of deferred tax assets and deferred tax liability but the answer is mostly irrelevant, or an attempt has not been made to discuss the recognition criteria of deferred tax assets. What is your firm’s tax expense in its latest financial statements? /1 The income tax expense has been correctly identified XXXXXXXXXXThe income tax expense has been incorrectly identified The income tax expense has not been identified. Page 5 of 6 HI5020 Corporate Accounting T1 2020 Is this figure the same as the company tax rate times your firm’s accounting income? Explain why this is, or is not, the case for your firm highlighting the reasons for differences. /3 Demonstrated an excellent understanding of the issue. The reasons for the differences have been identified and explained Demonstrated a good understanding of the issue. The reasons for the differences have been identified and explained Demonstrated a poor understanding of the issue. The reasons for the differences have been identified and explained with minor errors Demonstrated a poor understanding of the issue. The reasons for the differences have been identified and explained with major errors Demonstrated very poor or no understanding of the issue. The reasons for the differences have not been identified and explained Identify the deferred tax assets/liabilities that is reported in the balance sheet articulating the possible reasons why they have been recorded. /3 Has correctly identified the deferred tax assets and deferred tax liabilities reported by the company. The reasons for their origin have been identified and explained. Has correctly identified the deferred tax assets and deferred tax liabilities reported by the company. The reasons for their origin have been identified and explained with minor errors. Has identified the deferred tax assets and deferred tax liabilities reported by the company with minor errors. The reasons for their origin have been identified and explained with major errors. Has identified the deferred tax assets and deferred tax liabilities reported by the company with major errors. The reasons for their origin have been identified and explained with major errors. Has not identified the deferred tax assets and deferred tax liabilities reported by the company. The reasons for their origin have not been identified and explained. Is there any current tax assets or income tax payable recorded by your company? Why is the income tax payable not the same as income tax expense? /3 Has clearly identified if the company has reported any current tax asset or income tax payable. Has demonstrated an excellent understanding of the reasons for the differences between income tax payable and income tax expense. Has clearly identified if the company has reported any current tax asset or income tax payable. Has demonstrated a good understanding of the reasons for the differences between income tax payable and income tax expense. Minor errors. Has identified if the company has reported any current tax asset or income tax payable. Has demonstrated a reasonable understanding of the reasons for the differences between income tax payable and income tax expense. Major errors. Has identified if the company has reported any current tax asset or income tax payable. Has demonstrated a poor understanding of the reasons for the differences between income tax payable and income tax expense. Major errors. Has not been able to identify if the company has reported any current tax asset or income tax payable. Unable to demonstrate an acceptable level of understanding of reasons for the differences between income tax payable and income tax expense. Major errors. Page 6 of 6 HI5020 Corporate Accounting T1 2020 Is the income tax expense shown in the income statement same as the income tax paid shown in the cash flow statement? If not, why is the difference? /3 Has clearly identified if there is any difference between these two figures. Has demonstrated an excellent understanding on the reasons for the differences between these two figures. Has clearly identified if there is any difference between these two figures. Has demonstrated a good understanding on the reasons for the differences between these two figures. Has clearly identified if there is any difference between these two figures. Has discussed on the reasons for the differences between these two figures with minor errors Has attempted to explain if there is any difference between these two figures. Has discussed on the reasons for the differences between these two figures with major errors Has not made any acceptable attempt to explain if there is any difference between these two figures. Has discussed on the reasons for the differences between these two figures with major errors Briefly explain the concepts of temporary difference and permanent difference. Identify any permanent differences that your company may have. /2 Has shown an excellent understanding on the concepts of temporary difference and permanent difference. Has identified all permanent differences that the company might have. Has shown a good understanding on the concepts of temporary difference and permanent difference. Has identified all permanent differences that the company might have. Has shown a basic understanding on the concepts of temporary difference and permanent difference. Has attempted to identify permanent differences that the company might have. Has attempted to explain the concepts of temporary difference and permanent difference, major errors remain. Has attempted to identify permanent differences that the company might have. Has not Explained the concepts of temporary difference and permanent difference. Has not attempted to identify permanent differences that the company might have. What do you find interesting, confusing, surprising or difficult to understand about the treatment of tax in your firm’s financial statements? What new insights, if any, have you gained about how companies account for income tax as a result of examining your firm’s tax expense in its accounts? /2 Has provided an excellent synthesis of the discussions and analysis highlighting the reasons why the tax treatment can be complex. Has provided a very good synthesis of the discussions and analysis highlighting the reasons why the tax treatment can be complex. Has provided good synthesis of the discussions and analysis highlighting the reasons why the tax treatment can be complex. Minor errors. Has provided a very basic synthesis of the discussions and analysis highlighting the reasons why the tax treatment can be complex. Major errors in the discussion. Has provided a very poor or no synthesis of the discussions and analysis highlighting the reasons why the tax treatment can be complex. Major errors in the discussion.
Answered Same Day May 28, 2021 HI5020

Solution

Harshit answered on Jun 04 2021
157 Votes
ACCOUNTING FOR INCOME TAX
Abstract:
Accounting for Income tax is one of the major and complicated jobs in the corporate world. As we have to deal with two rules. One is Accounting Standards and another one is Income Tax Rules. This assignment is done to understand the accounting of Income tax-related issues in books of account of an entity. And to understand how the same is impacting our Income Statement, Balance sheet(BS) and Cash flow statement(CFS) and how to interpret the same. We had done the same by taking the financial statement of the cu
ent two years of Karoon Energy Limited. This assignment also covers the aspect as mentioned in the AASB(Australian Accounting Standard Board)-112 and the International Accounting Standard-12 which covers the treatment of tax in the books of accounts.
    List Of Content
    Serial No.
    Contents
    Page No
    1
    Introduction
    1
    2
    Concepts
    2-3
    3
    Recognition Criteria
    4
    4
    Amount of Tax expense
    5
    5
    Comparison of Accounting Income and Taxable Income
    6
    6
    Reporting of Defe
ed Tax Assets(DTA) and Liabilities(DTL)
    7
    7
    Comparison Between Income Tax Expenses and Payable
    8
    8
    Income Tax Expense VS Income Tax Paid
    9
    9
    Temporary Difference and Permanent Difference
    10
    10
    Insights
    11
    11
    Summary
    12
    12
    References
    13
Introduction:
Income tax in simple language means the tax to be paid in the income an entity earned during a particular financial year. But the calculation and its treatment in the books of account is not as simple as that. (IAS) International Accounting Standard-12 prescribes the treatment for income taxes in books of accounts(BOA) being the accounting for the cu
ent and future tax. IAS-12 was adopted by the International Accounting Standard Board (IASB) in 2001. We all must have observed that profits as per Financial Statements rarely match with profit as per Income Tax rules. So what is the reason for such differences? What is the accounting of such differences in the books of accounts? How over the Annual report will impact because of such differences? Answers for all the questions are given in IAS-12. The reason for differences between profits as per Financial Statement and Profits as per Income Tax rules are
oadly classified into two categories:
I. Temporary Differences
II. Permanent Differences
Temporary difference(TD)
esult in either Defe
ed Tax Liability(DTL) or Defe
ed Tax Asset(DTA). Defe
ed tax liability gives an indication t the stakeholders that the entity has to pay income taxs in future date for some transaction taken place in the this financial year. And defe
ed tax assets indicate stakeholders that entity paid excess Income tax in this year in comparison to income tax rules and the same excess payment will be adjusted in future date.
Temporary difference is further divided into two Sub- categories:
I. Taxable Temporary Differences
II. Deductible Temporary Differences
Taxable temporary differences will result in defe
ed tax (DTL) liability and DTA (Defe
ed Tax Asset) will be created for Deductible temporary differences.
On further, we will observe that Tax expenses as per Income Statement may not be equal to the tax paid as per the cash flow statement. The difference is major because of DTA and DTL.
To further understand the above-mentioned concepts we took the Annual Report of the Last two consecutive Year of Karoon Energy Limited and try to understand the accounting treatment of Income-tax expenses, Income tax paid, defe
ed tax asset, defe
ed tax liability and cu
ent tax asset. And to understand the measurement, recognition, and presentation of the same in financial statements.
CONCEPTS
I. Accounting Profit: Accounting profit of an entity refers to income after reducing total expenses from total revenue. It is computed using the accounting standard for a given financial year. This is the profit after deducting tax.
For Karoon Energy Limited Accounting profit (Loss) for the financial year ended on 30 June 2019 was US $ 29.58million.
And for the financial year ended 30 June 2018 accounting Loss (Profit) was US $ 18.41 million
Taxable Profit: Taxable profit refers to profit of an entity in which income tax is payable according to tax rules. It is calculated to know the taxability of the entity. The amount on which the income tax is payable by the entity to income tax authorities using the income tax laws (Weygandt., J.J., Kimmel, P.D., and Kieso, D.E., 2015). This is calculated using the accounting profit or profit before tax as the base for the calculation and thereafter certain deductions or exemptions are made to reduce such accounting income. More so some additions or disallowances are also made to increase the taxable income as per the income tax laws so that on such amount income tax is payable by the company which was not paid earlier.
Temporary Difference: Temporary difference refers to the difference between Financial Accounting and Tax Accounting rules that cause Tax as per Financial Accounting rules to be higher or lower in comparison to Tax as per Tax Accounting rules for the cu
ent year and lower or higher by an equal amount in the future period (Hanlon, D., Navissi, F. and Soepriyanto, G., 2014). This is called as timing difference as well as the same is capable of getting reversed in the future years. Example-Different depreciation method allowed in Finance accounting rule and tax rule.
Taxable Temporary Difference: Taxable temporary difference is timing difference results in lower tax as per Tax rules in comparison to tax as per financial accounting rules and hence tax payable in the this financial year will be lower than the accrual tax expense. The difference between the two will be recorded as Defe
ed Tax Liability. Example- Some expenses allowed as a deduction in the cu
ent year as per Tax rules but as per Finance accounting rule it is allowed as a deduction in future period. This is caused because of underpayment of tax in the present year but the same has to be paid in future years. Hence it is prudent on the part of the company to recognize the liabilities in the annual report.
Deductible Temporary Difference: A deductible temporary difference which results in higher tax as per Tax rules in comparison to tax as per financial accounting rules and hence tax payable in the cu
ent year will be higher than...
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