Income Taxes - Tax Base simple, someone

EastCoastJ

Can someone give a simple explanation of this? Dont' get it.

kamara5

They is nothing called Income Tax Only ...
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When we calculate the Net Income there is two way of doing this:

1. Net Income calculated for Financial Reporting Purposes, and according to GAAP Principles ...
This one called "Pre-Tax Income" or "Accounting Profit"

2. Net Income Calculated for Tax purposed using Local Tax Regulation, ...
This one called "Taxable Income"

Both of them Related to the income Statement ..

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When we calculate the Value of our Assets and Liability , we also doing Either Accourding to GAAP or Tax Regulation

1. Carrying Amount: is the Value of our Assets and Liabilities according to Accounting Principle,..

2. Tax Based : Is the Value of our Assets and Liabilities According to Tax Regulation ..

Both of Carrying Amount (CA), or Tax Base (TB) used for Balance Sheet ..

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So, we use Pre-Tax Income and Taxable income for GAAP and Tax Regulations Respectively ..

and we use CA and TB for GAAP and Tax Regulations Respectively

I hope you got the Idea ..

MonkeyBusiness

Do the first example in the CFA text .. I think it will make it much clear