Discussion Post
• Examine the impact of Accounting for the Uncertainty in Income Taxes on GAAP reporting. Identify the benefits of the requirements on financial reporting.
• Referencing Case C18-5 from your readings this week, explain why deferred tax assets and liabilities are recognized and reported on a corporation's balance sheet. Include a discussion of valuation allowance.
Case C18-5: Deferred Tax Assets and Liabilities A friend says to you, "I don't understand how tax- able temporary differences can be ‘liabilities' and how deductible temporary differences can be ‘assets.' It seems to me that these temporary dif- ferences relate only to the future and that account- ing is based on ‘historical cost.' In addition, the government frequently changes the tax laws, so no one knows what the future tax laws will be." Required: Prepare a written response for your friend that explains why deferred tax assets and deferred tax liabilities are recognized and reported on a corpo- ration's balance sheet. Include a discussion of a valuation allowance.
The response should include a reference list. One-inch margins, Using Times New Roman 12 pnt font, double-space and APA style of writing and citations.