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Analysis of Income Taxes

Q: Income tax paid

Income Tax Paid is the actual amount of cash a company paid to tax authorities during the period.

Q: 1. Accounting Profit definition and i want a synonym

Accounting Profit (also called Pretax Income or Earnings Before Tax ) is the company’s profit according to financial accounting standards (IFRS or GAAP) — before deducting income tax expense. It’s the profit that appears on the income statement , calculated using accrual accounting rules — not tax rules.

Q: 3. Deferred Tax Liabilities (DTL)

A Deferred Tax Liability (DTL) is created when a company pays less tax now but will owe more tax in the future due to a temporary difference between accounting income and taxable income.

Q: Statutory tax rate

The statutory tax rate is just the official corporate tax rate written in the law of the country where the company is legally based (domiciled) .

Q: Cash tax rate formula

The cash tax rate measures how much tax the company actually paid in cash during the year relative to its pretax income. Cash Taxes Paid/Pretax Income

10 important questions on Analysis of Income Taxes

Income tax paid

Income Tax Paid is the actual amount of cash a company paid to tax authorities during the period.

1. Accounting Profit definition and i want a synonym

Accounting Profit (also called Pretax Income or Earnings Before Tax) is the company’s profit according to financial accounting standards (IFRS or GAAP) — before deducting income tax expense.
It’s the profit that appears on the income statement, calculated using accrual accounting rules — not tax rules.

3. Deferred Tax Liabilities (DTL)

A Deferred Tax Liability (DTL) is created when a company pays less tax now but will owe more tax in the future due to a temporary difference between accounting income and taxable income.

Formula for the balance: DTA / DTL

(carrying value - tax base) x Tax rate

Three ways a DTL is created

- A DTL is created when income tax expense (income statement) is higher than taxes payable (tax return).
- DTL occur when revenues (or gains) are recognized in the income statement before they are taxable on the tax return,
- Or expenses (or losses) are tax deductible before they are recognized in the income statement.

Three ways a DTA is created

- A DTA is created when taxes payable (tax return) are higher than income tax expense (income statement).
- DTAs are recorded when revenues (or gains) are taxable before they are recognized in the income statement,
- when expenses (or losses) are recognized in the income statement before they are tax deductible, or when tax loss carryforwards are available to reduce future taxable income.

DTLs that are not expected to reverse, typically because of expected continued growth in capital expenditures, should be treated for analytical purposes as .........

Equity

Statutory tax rate

The statutory tax rate is just the official corporate tax rate written in the law of the country where the company is legally based (domiciled).

Effective tax rate formula

Income tax expense/ pretax income

Cash tax rate formula

The cash tax rate measures how much tax the company actually paid in cash during the year relative to its pretax income.
Cash Taxes Paid/Pretax Income

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