Front Back
Deferred Tax Asset
results in future deductible amounts
Deferred Tax Liability
results in future taxable amounts
Permanent Difference
Accounting transaction that the company reports for book purposes but cant report for tax purposes. Tax-exempt
Pretax Financial Income
Financial Reporting Term, referred to as income before taxes. GAAP, listed as expense
Taxable income
tax accounting term, indicates the amount used to compute income taxes payable, tax reporting- listed as payable
Temporary Difference
Tax Basis of Asset- Reported Amount
Current Tax Expense
amount of income taxes payable for the period
Deferred Tax Expense
increase in the deferred tax liability balance from the beginning to the end of the accounting period
Deferred tax benefit
increase in deferred tax asset from the beginning to the end of the accounting period
Net Operating Loss
occurs for tax purposes in a year when tax-deductible expenses exceed taxable revenues
Loss Carryback
company may carry the net operating loss back two years and receive refunds for income taxes paid in those years
Income that is not taxable
municipal and state interest on bonds, life insurance proceeds
Expenses that are not deductible
life insurance premiums, fines and penalties, operating expenses of illegal activities
Pension Plan
an arrangement whereby an employer provides benefits to retired employees for services they provided in their working years
Contributory Pension Plan
employees bear part of the cost of the stated benefits or make payments to increase their benefits
Noncontributory Pension Plans
employer bears the entire cost
Qualified Pension Plans
permit deductibility of the employers contributions to the pension fund
Defined Contribution Plan
the employer agrees to contribute to a pension trust a certain sum each period 401 k plan employer is not liable usually turns over to an independent third-party trustee
Defined Benefit Plan
outlines the benefits that employees will receive when they retire employer is liable
individuals trained through a long and rigorous certification program to assign probabilities to future events and their financial effects
Vested Benefit Obligation
companies compute by using vested benefits at their current salaries level
Vested Benefits
those that the employee is entitled to receive even if he or she renders no additional services to the company
Accumulated benefit obligation
A measurement of the pension obligation that computes the deferred compensation amount on all years of employees' service --both vested and non-vested-- using current salary levels.
Projected Benefit Obligation
bases the deferred compensation amount on both vested and non-vested service using future salaries
measured as the difference between the fair value of the plan assets and the projected benefit obligation
Components of Pension Expense
Service Cost Interest on the Liability Actual Return on Plan Assets Amortization of Prior Service Cost Gain or Loss
service cost
the actuarial present value of benefits attributed by the pension benefit formula to employee service during the period
Interest on the Liability
we use a discount rate to determine the future liability, and we add interest costs at that rate times the future pension benefit
Actual Return on Plan Assets
increase in pension funds from interest, dividends, and realized and unrealized changes in the fair value of the plan assets (End. Balance-Beg. Balance)-(Contributions-Benefits Paid)
Amortization of Prior Service Cost
allocates the cost of providing these retroactive benefit to pension expense in the future, specifically to the remaining service years of the affected employees
Gain or Loss
difference between the actual return and the expected return on plan assets amortization of the net gain or loss from previous periods
Pension Worksheet
Annual Pension Expense Cash Prior Service Costs Gain/Loss Pension Asset/Liability Projected Benefit Obligation Plan Assets

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