JARD-REF3-L-INCOMETAXES

ACCOUNTING FOR INCOME TAXES

Accounting Income vs Taxable Income
Accounting Income
Also called financial income, is pre-tax income based in
accordance with financial accounting standards.
Taxable Income
Income measured in accordance with tax laws and
regulations through the Bureau of Internal Revenue.

Differences between Taxable and Financial Income

Non-temporary or Permanent Difference
Items included in the financial income but never in
taxable income termed as non-taxable revenue and
non-deductible expenses.
No deferred taxes are recognized since no future tax
consequences are created.
Non-taxable or tax exempt inome
Gain from settlement of life insurance of
officers and employees where thee corporation
is named the beneficiary.
Dividend revenue by a domestic corporation or
non-resident corporation from a domestic
corporation.
Non-deductible expenses
Fines and penalties for violations of law
Charitable contribution in excess of tax
limitations
Premiums on life insurance for officers and
employees
Impairment loss on goodwill
Pretax financial income
Nondeductible income
Nontaxable income
Financial income subject to tax
Future deductible amounts
Future taxable amounts
Taxable Income

-ADAMSON UNIVERSITY-

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Temporary Differences
Certain items that are included in financial income
earlier or later than in taxable income.
Recognized for both financial and tax reporting but
at different time periods.
Difference will recognized deferred tax liability if the
financial income is greater than taxable income and a
deferred tax asset if the financial income is lesser
than taxable income.
Classification of temporary differences
Taxable temporary differences
Results to deferred tax liability / future taxable
amounts.
Financial income > Taxable Income
Asset carrying amount > Asset tax base
Liability carrying amount < Liability tax
base
Deductible temporary differences
Results to deferred tax assets / future
deductible amounts.
Financial Income < Taxable Income
Asset carrying amount < Asset tax base
Liability carrying amount > Liability tax
base
Income Tax Expense-Current*
Income Tax Expense-Deferred
Deferred Tax Asset**
Deferred Tax Liability***
Income Tax Payable*
*based on Taxable Income
**based on Future Taxable Amounts
***based on Future Deductible Amounts

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