Problem: Richard Co., a U.S.-based company, operates in three countries in addition to the United States. The following table reports the company's pre-tax income and the applicable tax rate in these countries for the year ended December 31, Year 1. Richard doesn't have any temporary tax differences, but it does have two permanent differences: (1) non-taxable municipal bond interest of $70,000 in the United States and (2) non-deductible expenses of $ 30,000 in the United States.
|
Country
|
Pre-tax Income
|
Applicable Tax Rate
|
|
United States
|
$1,450,000
|
21%
|
|
Country One
|
$1,000,000
|
30%
|
|
Country Two
|
$400,000
|
20%
|
|
Country Three
|
$310,000
|
15%
|
|
Total
|
$3,160,000
|
|
Permanent differences $40,000
Book Income $3,200,000
Using IFRS, prepare the numerical reconciliation between tax expense and accounting profit that would appear in Richard's income tax note in the Year 1 financial statements. Show two different ways in which this reconciliation may be presented.
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