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  • Catherine Duffy: Welcome back. Let's wrap up this question on loss carrybacks and loss

  • carryforwards. Here's the values that we've calculated for the loss carrybacks. This is

  • the portion that we're going to ask for a refund back. This is not an expense. This

  • is a benefit, a credit, to the income tax income statement account. It's a benefit,

  • as well as the deferred tax asset that we set up will result in a deferred tax benefit

  • of $8,400. Here's the 2 numbers related to 2017. Then, we'll move on and we'll do the

  • accounting for the tax year of 2018. In 2018, we'll make the assumption that at the end

  • of 2018 we calculated a taxable income of $20,000. Now, we need to go and calculate

  • that current tax and deferred tax situation, but knowing that we had some loss carryforwards

  • left over from 2017 to affect this year's calculation of taxes.

  • Now, we've fast forwarded a year and we're in 2018. We're doing the calculation of the

  • current and the deferred tax for 2018. In 2018, I gave you the fact that we experienced

  • a taxable income that year of $20,000. The first thing we want to do with that taxable

  • income ... We don't want to pay taxes on that yet. We want to check to our tax return and

  • say, "Hey. Do we have any loss carryforwards?" It turns out that we do. We're going to apply

  • the loss carryforward that we had at the end of last year. It was a $50,000 loss carryforward.

  • We don't need the whole thing. We only apply $20,000 to 2018. We'll have no current tax

  • owing for this year. However, we've used up $20,000 of our loss carryforward of the total

  • $50,000, if you remember, from 2017 loss carryforward.

  • Then, when we go do our deferred tax calculation, we're going to look at that loss carryforward

  • that we have of $50,000, but we used in 2018, $20,000 of it. We now only have $30,000 remaining,

  • so the remaining loss carryforward. Then, you have to ask the same question you did

  • in 2017. Do I think I can earn taxable income of $30,000 in the next 19 years, because we're

  • 1 year forward? In the next 19 years, do I think I can use $30,000? I'm just going to

  • stick with the same assumption we made in 2017. I'm going to assume that 80% we can

  • use, and 20% right now we're estimating that we can't use. We'll do our deferred tax calculation

  • based on this 80%. The 80%, we have a deferred tax. That works out to $24,000 loss carryforward

  • times the tax rate of 21%. We want a deferred tax asset of $5,040. That's the deferred tax

  • asset we want at the end of 2018. Our unadjusted balance is $8,400 that we set up as a deferred

  • tax asset last year, if you recall.

  • Our journal entry to record to deferred tax for this year is we're going to record an

  • expense of $3,360. We're going to take that deferred tax asset account, and we want to

  • bring it down from a debit of $8,400, we want to bring it down to a debit of only $5,040.

  • We're going to credit the deferred tax asset account, and we're going to debit deferred

  • tax expense for $3,360. We've got $0 current tax expense this year, and we have $3,360

  • of deferred tax expense for this year. Now, we're in 2018 with a $20,000 taxable income.

  • It results in no current tax needing to be recorded because we had a loss carryforward

  • at the end of 2017 of $50,000, which we applied to this taxable income of $20,000 and resulted

  • in we didn't have to pay any tax this year. However, our loss carryforward now at the

  • end of 2018 is a smaller number. It's resulting in a smaller deferred tax asset. We had to

  • reverse out some of the deferred tax asset that we had, which resulted in a deferred

  • tax expense entry here.

  • Now, I want to show you just as a wrap-up, a summary of what the journal entries looked

  • like for both 2017 for taxes and 2018 tax journal entries. In 2017, the current tax

  • entry was a debit to income tax recoverable, or receivable, and a credit to current tax

  • benefit on income statement account. $8,200 was the current tax recoverable, so that's

  • a balance sheet account of $8,200, and the income statement would have a favorable number

  • of $8,200. The deferred tax journal entry, to set up the deferred tax asset for the loss

  • carryforward was a debit to the deferred tax asset of $8,400, and a credit to deferred

  • tax benefit of $8,400. Again, you'll have an asset on your balance sheet of $8,400.

  • It will be a long-term asset following IFRS. These two figures will be favorable numbers

  • in your income statement for 2017.

  • Then, we moved on to 2018, and we had no current tax owing because we applied that loss carryforward

  • to the $20,000 of taxable income. No current tax owing, so no journal entries required.

  • The deferred tax asset that you would set up here of $8,400, we had to draw it down

  • because we have less tax carryforward. We want to draw down that deferred tax asset,

  • so you'll credit the deferred tax asset to make it smaller. We'll draw it down by $3,360,

  • and the other side of the entry is a debit to deferred tax expense of $3,360. That number

  • will be on your income statement as an unfavorable value. This number will offset, will be a

  • credit to the account of $8,400. The result will be on your balance sheet. You'll have

  • a $5,040 worth of long-term deferred tax asset. That summarizes the journal entries that we

  • created for both fiscal year 2017/2018, applying the loss carryback and loss carryforward rules.

  • I hope you enjoyed this video, and found some value to this, and look forward to seeing

  • you again soon. Bye for now.

Catherine Duffy: Welcome back. Let's wrap up this question on loss carrybacks and loss

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B2 H-INT US tax deferred tax deferred loss asset income

Tax Loss Carryback and Carryforward Accounting (Canada/IFRS) - Part 2 of 2

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    陳虹如   posted on 2017/06/23
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