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Income tax expense, income taxes payable/owed/paid, and US GAAP Brablo 01-20-2007
Posted by Brablo on January 20, 2007, 6:47 pm
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 According to my readings, US GAAP states that "Inventory method used
for financial statements and tax purposes must be the same." However,
as I progress into my readings, I notice that "When determining taxable
income, companies will tend to select allowable accounting methods
wthat will minimize the taxable income upon which income taxes are
levied."

Don't these two ideas contradict themselves? Or is it that,
ultimately, the 2 tax amounts must equate to one another, but in the
short term, it's OK if they deviate with one another due to the
timing/temporary differences?


Posted by just Ed on January 20, 2007, 11:09 pm
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Brablo wrote:
> According to my readings, US GAAP states that "Inventory method used
> for financial statements and tax purposes must be the same." However,
> as I progress into my readings, I notice that "When determining taxable
> income, companies will tend to select allowable accounting methods
> wthat will minimize the taxable income upon which income taxes are
> levied."
>
> Don't these two ideas contradict themselves? Or is it that,
> ultimately, the 2 tax amounts must equate to one another, but in the
> short term, it's OK if they deviate with one another due to the
> timing/temporary differences?

No. Its simple: they pick the methods to minimize
taxes then use the same methods for statements.

If this really was not obvious I suggest you ask
to be confined for your own safety.


Posted by Rocinante on January 22, 2007, 4:23 am
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On 20 Jan 2007 15:47:27 -0800, Brablo wrote:

> According to my readings, US GAAP states that "Inventory method used
> for financial statements and tax purposes must be the same." However,
> as I progress into my readings, I notice that "When determining taxable
> income, companies will tend to select allowable accounting methods
> wthat will minimize the taxable income upon which income taxes are
> levied."
>
> Don't these two ideas contradict themselves? Or is it that,
> ultimately, the 2 tax amounts must equate to one another, but in the
> short term, it's OK if they deviate with one another due to the
> timing/temporary differences?

Do you have dogs named FIFO and LIFO?

--
"It's good to have money and the things that money can buy, but it's good,
too, to check up once in a while and make sure that you haven't lost the
things that money can't buy."
--George Horace Lorimer

RocinanteREMOVETHIS@gmail.com
1/22/2007 4:23:18 AM

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