...State X. eVade does not collect or remit sales taxes to State X. As a December 31, 2011 eVade has operated in state X for five years. In recent court ruling, States X states that the company would be subject to collect sales taxes. Although the company considers the risk of detection to not be probable, eVade estimated the total amount of sales tax payables for the past five years to be $50 millions plus $6 million in interest and $ 4 million in penalties. On March 15, 2012, State X established a tax amnesty program. Any unregistered taxpayer who voluntarily registers to collect tax will be forgiven 50 percent of all unpaid sales tax and all interest and penalties. eVade decides to take advantage of this program. Issue 1 As of December 31, 2011 What amount, if any, of sales taxes due should recognized in eVade ‘s financial statements? Scope In order to analyze what part of the sections sections of the FASB Accounting Standards Codification applies to the case, ASC 450 section was examined since non-income taxes are often accounted for under the contingencies guidance. Next, ASC 740 section was also studied. ASC 740-10-20 defines “income taxes as domestic and foreign federal (national), state, and local (including franchise) taxes based on income.” Since sales taxes are under the umbrella of local and state, the following step will be defining if eVade should recognized a tax position. Definition of a Tax Position ASC 740 includes the following implementation guidance...
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...Memo To: Chief Executive Officer From: Nicholas Petrovich cc: Controller Date: February 12, 2013 Re: Income Taxes After reviewing Deloitte (D) guidance and the requirements of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 740, Income Taxes, we addressed (1.) What are the four possible sources of taxable income according to ASC 740? (2.) How much of the reversing taxable temporary differences may be considered in estimating taxable income? (3a.) In evaluating the income LOL is projecting related to future operations, is LOL in a cumulative loss position? (3b.) May LOL exclude the impact of the impairment of the non deductible goodwill when estimating future taxable income? (3c.) May LOL exclude the expense from writing off the accounts receivable from the customer who declared bankruptcy when evaluating the projections of future income? (3d.) Does the evidence of historic losses affect our ability to accept the company’s estimate of future growth? (3e.) In evaluating the income that LOL is projecting related to future operations, what evidence might you ask for to support the company’s projections? (4.) Would the tax- planning strategy to sell and lease back manufacturing equipment be a tax- planning strategy that is considered prudent and feasible? (5.) Would the tax-planning strategy to sell but not lease back the primary manufacturing facility be a tax-planning strategy that is prudent and feasible? We first looked to...
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...Transaction Services • • TS Insights List bullet List bullet Sub bullet evaluation of the other two sources of taxable income ― Vol. 3 Heading 2 Financial reporting in an uncertain economy A closer look at income tax valuation allowances October 2009 Additional text goes here. Heading 3 Additional text goes here. Notwithstanding early signs that the global recession may be waning, the uncertain economic future continues to constrict corporate America. As companies continue to incur losses, focus has heightened on income tax valuation allowance assessments by companies and their auditors, as well as the Securities and Exchange Commission staff, through the issuance of comment letters. Specifically, much of this focus is on whether deferred tax assets reflected on corporate balance sheets will ultimately be realized. When a deferred tax asset is not fully realizable, a valuation allowance must be established against the deferred tax asset to reduce it to a net amount that is realizable. The related expense is generally reflected in the income statement as an income tax expense. A clear understanding of the judgmental nature of valuation allowance accounting models is critical in addressing this issue. The need for judgment The accounting requirements for deferred tax assets are set out in ASC 740, "Income Taxes," which establishes a "more likely than not" threshold for recognizing deferred tax assets. The interpretation of this criteria has historically...
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...Energy Inc. Date: October 19, 2013 Prepared by: Yuehan Zhang (Stefanie) Reviewed by: Professor Robert Elya ISSUE: Accounting for Energy Inc.’s environmental obligations, income tax and install smoke filters. BRIEF BACKGROUND OF COMPANY Energy Inc. (Energy) is a public company that operates in the oil industry. As of December 31, 2011, Energy recognized $ billion in revenue for the sale. Sometimes, Energy’s operations result in soil contamination and Energy should clean up this contamination when legislation requiring under the laws of the particular country. In addition, Energy has a widely published environmental policy in which it undertakes clean up all contamination that it causes. Energy is currently involved in environmental obligations, such as clean up the lands. ACCOUNTING QUESTIONS 1. Does Energy recognizes and accrues the liability of clean up costs in this year? What is the accounting treatment? 2. Is Energy has the obligations to undertake soil remediation in Dirty country? What is the accounting treatment for this operation in Dirty country? 3. What is the accounting treatment for new income tax? What is the accounting treatment for training employees? 4. Does Energy have obligations to install smoke filters this year? What is the accounting treatment for installing smoke filters in Energy’s factories next year? SUMMARY CONCLUSION ON ACCOUNTING QUESTIONS 1. Energy should recognize and accrue the liability of clean up...
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...CHAPTER 3 TAXES ON THE FINANCIAL STATEMENTS SOLUTIONS TO PROBLEM MATERIALS | | | |Status: |Q/P | |Question/ |Learning | |Present |In Prior | |Problem |Objective | Topic |Edition |Edition | | | | | | | |1 |LO 1 |Book versus taxable income |Unchanged |1 | |2 |LO 1 |Entities included in financial statements |Modified |2 | |3 |LO 1 |Entities included in consolidated tax |Modified |3 | | | | return | | | |4 |LO 1 |Tax return tax expense versus book tax |Unchanged |4 | | | | expense | | | |5 |LO 1 ...
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...ACTG 493, Accounting Cases, Research and Analysis Group Case 1 Memorandum To: Professor Siyi Li From: Group 4 Date: July 5, 2016 Subject: eVade Pays Up (Deloitte Trueblood Case 14-07) I. Case Description and Key Facts eVade is an online retailer that fulfills its orders by shipping its products directly to customers across all 50 states in the U.S. eVade does not have a brick-and-mortar store presence in any state, but does operate distribution centers in various states, including State X. eVade does not collect or remit sales tax to State X. This practice is consistent with eVade’s practice in all 50 States. In recent court rulings, State X has taken the position that operating a distribution center within the state constitutes nexus and thus would subject any company operating a distribution center to collect and remit sales tax on all sales made within the state. As of December 31, 2011, eVade has operated a distribution center within State X for the past five years. Although the company considers the risk of detection to not be probable, eVade estimates total sales tax payable to State X to be $50 million. In addition, eVade estimates that $6 million in interest and $4 million in penalties are also payable to the state. On March 15, 2012, a tax amnesty program was established by the Governor of State X. The program provides that an unregistered taxpayer who voluntarily registers to collect sales tax prospectively will be forgiven...
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...Handout 1 — LOL Draft Income Statement and Excerpt From Tax Footnote as of December 31, 2010 |LOL Corporation | |CONSOLIDATED STATEMENT OF OPERATIONS | |Years ended December 31, 2010, 2009, and 2008 | |(in thousands) | | |2010 |2009 |2008 | | | | | | |Revenues, net | 2,000,000 | 1,900,000 | 1,800,000 | |Cost of goods sold | 1,400,000 | 1,250,000 | 1,200,000 | |Gross profit | 600,000 | 650,000 | 600,000 | |Selling, general, and administrative expense | 500,000 | 500,000 | 400,000 | |Goodwill impairment | 750,000 | - | - ...
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...and reporting in the United States ................................................................................ 6 IFRS and U.S. GAAP comparison ................................................................................................................. 6 Overall financial statement presentation ................................................................................................... 8 General .......................................................................................................................................................... 8 Statement of financial position / balance sheet .............................................................................................. 9 Statement of comprehensive income / income statement ........................................................................... 12 Statement of changes in equity .................................................................................................................... 16 Statement of cash flows ............................................................................................................................... 17 Non-current assets held for sale and discontinued operations...
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...........................................................7 Business combinations ...................................................11 Inventory .......................................................................13 Long-lived assets ...........................................................14 Intangible assets ............................................................16 Impairment of long-lived assets, goodwill and intangible assets ............................................................18 Financial instruments .....................................................20 Foreign currency matters ...............................................28 Leases ...........................................................................30 Income taxes..................................................................33 Provisions and contingencies ..........................................35 Revenue recognition.......................................................37 Share-based payments ...................................................39 Employee benefits other than share-based payments ......41 Earnings per share .........................................................44 Segment reporting .........................................................45 Subsequent events .........................................................46 Related parties...............................................................48 Appendix — The evolution of IFRS ...................................49 US...
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...US GAAP vs. IFRS The basics March 2010 Table of contents 2 5 7 8 11 13 14 16 18 20 26 28 31 33 35 38 40 42 43 44 46 47 Introduction Financial statement presentation Interim financial reporting Consolidations, joint venture accounting and equity method investees Business combinations Inventory Long-lived assets Intangible assets Impairment of long-lived assets, goodwill and intangible assets Financial instruments Foreign currency matters Leases Income taxes Provisions and contingencies Revenue recognition Share-based payments Employee benefits other than share-based payments Earnings per share Segment reporting Subsequent events Related parties Appendix — The evolution of IFRS Introduction It is not surprising that many people who follow the development of worldwide accounting standards today might be confused. Convergence is a high priority on the agendas of both the US Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) — and “convergence” is a term that suggests an elimination or coming together of differences. Yet much is still made of the many differences that exist between US GAAP as promulgated by the FASB and International Financial Reporting Standards (IFRS) as promulgated by the IASB, suggesting that the two GAAPs continue to speak languages that are worlds apart. This apparent contradiction has prompted many to ask just how different are the two sets of standards? And where differences exist, why do they exist...
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............................................ 7 Business combinations................................................... 13 Inventory ....................................................................... 15 Long-lived assets ........................................................... 16 Intangible assets............................................................ 18 Impairment of long-lived assets, goodwill and intangible assets ............................................................ 20 Financial instruments..................................................... 23 Foreign currency matters .............................................. 30 Leases ........................................................................... 32 Income taxes ................................................................. 35 Provisions and contingencies ......................................... 37 Revenue recognition ...................................................... 39 Share-based payments................................................... 41 Employee benefits other than share-based payments ..... 43 Earnings per share ......................................................... 45 Segment reporting ......................................................... 46 Subsequent events ........................................................ 47 Related parties .............................................................. 49 Appendix — The evolution of IFRS ..............................
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...COURSE OBJECTIVES Financial and management accounting are more closely linked in practice than one might expect from reading traditional textbooks and the problems to be resolved often have income tax and auditing consequences as well. This seminar is designed to provide you with opportunities to apply general concepts and principles learned in intermediate and advanced financial accounting courses to new economic transactions and business decisions. Cases will be used to permit you to practice the skills you will need as a professional accountant whether in public accounting or private industry. In particular, this course is intended to refine your skills in researching the professional accounting literature to solve particular accounting problems, to arrive at defensible solutions where GAAP is vague or nonexistent, and to present your research conclusions in a professional manner. You will have opportunities to present your work orally and in writing. REQUIRED MATERIALS: A recent Intermediate Accounting text (Kieso used in Acct 315 & 414 would be fine) A recent Advanced Accounting text (whatever was used in for Acct 415-515 would be fine) On-line access to FASB’s ASC (accounting standards codification). The Department has purchase academic license so you can use the $850 “professional” version rather than the free version which has fewer bells and whistles. You can log on from fasb.org but it will take you to http://aaahq.org/ascLogin.cfm where you enter...
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...Work Plan for the Consideration of Incorporating International Financial Reporting Standards into the Financial Reporting System for U.S. Issuers A Comparison of U.S. GAAP and IFRS A Securities and Exchange Commission Staff Paper November 16, 2011 OFFICE OF THE CHIEF ACCOUNTANT UNITED STATES SECURITIES AND EXCHANGE COMMISSION This is a paper by the Staff of the U.S. Securities and Exchange Commission. The Commission has expressed no view regarding the analysis, findings, or conclusions contained herein. TABLE OF CONTENTS I. II. Introduction..........................................................................................................................1 Methodology ........................................................................................................................2 A. Scope of the Analysis...............................................................................................2 B. MoU and Other Joint Projects..................................................................................3 C. SEC Rules and Regulations .....................................................................................8 D. General Observations and Clarifications .................................................................8 Comparison of Requirements ............................................................................................11 A. Accounting Changes and Error Corrections...
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...Illustrative Financial Statements Prepared Using the Financial Reporting Framework for Small- and Medium-Entities Illustrative Financial Statements This component of the toolkit contains sample financial statements intended to illustrate financial statements prepared under the FRF for SMEsTM accounting framework. Also included are sample financial statements based on accounting principles generally accepted in the United States of America (U.S. GAAP). During the AICPA staff’s outreach efforts related to the FRF for SMEsTM accounting framework, users of financial statements and other stakeholders asked for comparisons of financial statements prepared under the framework to those prepared under U.S. GAAP. These are presented for comparative purposes. These sample financial statements are included for illustrative purposes and are not intended to establish reporting requirements. Furthermore, the dollar amounts shown are illustrative only and are not intended to indicate any customary relationship among accounts. The sample financial statements do not include all of the accounts and transactions that might be found in practice. The notes indicate the subject matter generally required to be disclosed, but should be expanded, reduced, or modified to suit individual circumstances and materiality considerations. In the following illustrative financial statements based on the FRF for SMEs accounting framework, it is presumed that the management of Alpha Contractors Inc. and subsidiary...
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...KNOWLEDGE. INNOVATION. INSIGHT. 2012 Annual Report THE SCIENCE OF RISK Company Profile Verisk Analytics (NASDAQ: VRSK) provides information about risk to professionals in many fields, including insurance, healthcare, financial services, supply chain, and others. Through its renowned ISO brand, the company has delivered data, analytics, and decision support services for the property/casualty insurance industry for more than 40 years. Using advanced technologies to collect, analyze, develop, and deliver information, Verisk Analytics helps customers evaluate and manage risk. The company draws on vast expertise in actuarial science, insurance coverages, fire protection, fraud prevention, catastrophe and weather risk, predictive modeling, data management, economic forecasting, social and technological trends, and many other fields. To meet the needs of diverse clients, Verisk Analytics employs an experienced staff of business and technical specialists, analysts, and certified professionals. In the United States and around the world, Verisk Analytics helps customers protect people, property, and financial assets. For more information, visit www.verisk.com. Financial Highlights Revenues $ Millions 1,500 GR CA .5 = 14 % Adjusted EBITDA $ Millions 700 600 500 1,200 GR CA 5. 3 =1 % 900 400 300 200 600 300 100 0 2008 2009 2010 2011 2012 0 2008 2009 2010 2011 2012 2012 Sources of Revenues 2012 Revenues by Operating Segment Decision Analytics: 62% ...
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