Subsidiary Preferred Stock Consolidated Earnings per Share and

Subsidiary Preferred Stock, Consolidated Earnings per Share, and Consolidated Income Taxation Chapter 10 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 1

Learning Objective 1 Modify consolidation procedures for subsidiary companies with preferred stock in their capital structure. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 2

Subsidiaries with Preferred Stock Outstanding When preferred stock has a call or redemption price, this amount is used in allocating the investee’s equity to preferred stockholders. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 3

Subsidiaries with Preferred Stock Outstanding 1 If there is no redemption provision, the equity is allocated on the basis of par value plus any liquidation premium. 2 Any dividends in arrears on cumulative preferred stock is allocated to the preferred stockholders. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 4

Subsidiary With Preferred Stock Not Held by Parent Poe acquired a 90% interest in Sol on January 1, 2004, for $395, 500. There were no preferred dividends in arrears as of January 1, 2004. During 2004, Sol had income of $50, 000 and paid $30, 000 dividends. Dividends were $20, 000 on common stock and $10, 000 on preferred stock. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 5

Subsidiary With Preferred Stock Not Held by Parent Sol’s stockholders’ equity December 31, 2003 $10 preferred stock, $100 par, cumulative, nonparticipating, callable at $105 per share $100, 000 Common stock, $10 par 200, 000 Other paid-in capital 40, 000 Retained earnings 160, 000 Total stockholders’ equity $500, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 6

Subsidiary With Preferred Stock Not Held by Parent Total Sol stockholders’ equity Less: Preferred stockholders’ equity (1, 000 × $105) Common stockholders’ equity $500, 000 Price paid for 90% interest Less: Book and fair value acquired ($395, 000 × 90%) Goodwill $395, 500 – 105, 000 $395, 000 – 355, 500 $ 40, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 7

Subsidiary With Preferred Stock Not Held by Parent Sol’s stockholders’ equity December 31, 2004 Total stockholders’ equity Less: Preferred stockholders’ equity (1, 000 × $105) Common stockholders’ equity $520, 000 – 105, 000 $415, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 8

Minority Interest in Preferred Stock Minority interest in Sol at December 31, 2004 $105, 000 × 100% of preferred equity $105, 000 $415, 000 × 10% of common equity 41, 500 Total $146, 500 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 9

Subsidiary Preferred Stock Acquired by Parent A parent company’s purchase of the outstanding preferred stock of a subsidiary results in a retirement of the stock purchased from the viewpoint of the consolidated entity. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 10

Subsidiary Preferred Stock Acquired by Parent Sol Corporation experienced a loss of $40, 000 in 2005. No dividends were paid. What is Sol’s stockholders’ equity at 12/31/2005? $520, 000 – $40, 000 = $480, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 11

Subsidiary Preferred Stock Acquired by Parent What is Poe’s share of this loss? ($40, 000 + $10, 000 income to preferred) × 90% What is Poe’s investment in Sol on 12/31/2005? © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 12

Subsidiary Preferred Stock Acquired by Parent 1/1/2004 12/31/2004 1/1/2005 Poe’s Investment 395, 500 18, 000 36, 000 413, 500 45, 000 loss 368, 500 Dividends 12/31/2005 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 13

Constructive Retirement of Subsidiary Preferred Stock On January 1, 2006, Poe purchased 800 of Sol’s preferred shares (80% interest) at $100 per share. Sol reports net income of $20, 000 for 2006. $115, 000 × 80% = $92, 000 book value $92, 000 – $80, 000 = $12, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 14

Constructive Retirement of Subsidiary Preferred Stock Investment in Sol Preferred Cash To record purchase of stock 80, 000 Investment in Sol Preferred 12, 000 Other Paid-in Capital 12, 000 To adjust other paid-in capital to reflect constructive retirement © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 15

Constructive Retirement of Subsidiary Preferred Stock 1/1/2004 12/31/2004 1/1/2005 Income Poe’s Investment 395, 500 18, 000 36, 000 413, 500 45, 000 loss 368, 500 9, 000 377, 500 Dividends 12/31/2006 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 16

Learning Objective 2 Calculated basic and diluted earnings per share for a consolidated reporting entity. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 17

Parent Company and Consolidated Earnings Per Share GAAP requires that all firms calculate and report basic and diluted (where applicable) earnings per share (EPS). Consolidated entities disclose (EPS) on a consolidated basis. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 18

Parent Company and Consolidated Earnings Per Share A parent company’s net income and EPS under the equity method are equal to consolidated net income and consolidated EPS. Parent Company procedures for computing EPS depend on the subsidiary’s capital structure. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 19

General Format for EPS Calculations Numerator in Dollars ($) Income to parent’s common stockholders Add: Adjustments for parent’s dilutive securities Add: Adjustments for subsidiary’s potentially dilutive securities convertible into parent company stock Replacement calculation Deduct: Parent’s equity in subsidiary’s diluted earnings Add: Parent’s equity in subsidiary’s diluted earnings Parent's diluted earnings = a A $$$ +$ N/A N/A $$$ A: Subsidiary does not have potentially dilutive securities outstanding © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 20

General Format for EPS Calculations Numerator in Dollars ($) Income to parent’s common stockholders Add: Adjustments for parent’s dilutive securities Add: Adjustments for subsidiary’s potentially dilutive securities convertible into parent company stock Replacement calculation Deduct: Parent’s equity in subsidiary’s diluted earnings Add: Parent’s equity in subsidiary’s diluted earnings Parent's diluted earnings = a B $$$ +$ N/A –$ +$ $$$ B: Subsidiary has potentially dilutive securities convertible into subsidiary common stock © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 21

General Format for EPS Calculations Numerator in Dollars ($) Income to parent’s common stockholders Add: Adjustments for parent’s dilutive securities Add: Adjustments for subsidiary’s potentially dilutive securities convertible into parent company stock Replacement calculation Deduct: Parent’s equity in subsidiary’s diluted earnings Add: Parent’s equity in subsidiary’s diluted earnings Parent's diluted earnings = a C $$$ +$ +$ N/A $$$ C: Subsidiary has potentially dilutive securities convertible into parent company common stock © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 22

General Format for EPS Calculations Denominator in Shares (Y) Parent’s common shares outstanding Add: Shares represented by parent’s potentially dilutive securities Add: Shares represented by subsidiary’s potentially dilutive securities convertible into parent company common shares Parent’s common shares and common share equivalents = b A YYY Parent Company and Consolidated Diluted EPS a÷b +Y N/A YYY A: Subsidiary does not have potentially dilutive securities outstanding © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 23

General Format for EPS Calculations Denominator in Shares (Y) Parent’s common shares outstanding Add: Shares represented by parent’s potentially dilutive securities Add: Shares represented by subsidiary’s potentially dilutive securities convertible into parent company common shares Parent’s common shares and common share equivalents = b B YYY Parent Company and Consolidated Diluted EPS a÷b +Y N/A YYY B: Subsidiary has potentially dilutive securities convertible into subsidiary common stock © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 24

General Format for EPS Calculations Denominator in Shares (Y) Parent’s common shares outstanding Add: Shares represented by parent’s potentially dilutive securities Add: Shares represented by subsidiary’s potentially dilutive securities convertible into parent company common shares Parent’s common shares and common share equivalents = b C YYY Parent Company and Consolidated Diluted EPS a÷b +Y +Y YYY C: Subsidiary has potentially dilutive securities convertible into parent company common stock © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 25

Dilutive Securities of Subsidiary Convertible into Subsidiary Shares Diluted earnings of the parent company are adjusted by excluding the parent’s equity in subsidiary realized income and replacing that equity with the parent’s share of diluted earnings of the subsidiary. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 26

Subsidiary With Convertible Preferred Stock Plant Corporation purchased 90% of Seed Corporation’s outstanding voting common stock for $328, 000 on January 1, 2003. During 2003, Seed reports $50, 000 net income and pays $25, 000 dividends, $10, 000 to preferred and $15, 000 to common. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 27

Subsidiary With Convertible Preferred Stock January 1, 2003 Common stock, $5 par, 200, 000 shares issued and outstanding Common stock, $10 par, 20, 000 shares outstanding 10% cumulative, convertible preferred stock, $100 par, 1, 000 shares outstanding Retained earnings Total stockholders’ equity Plant Seed $1, 000 $200, 000 500, 000 $1, 500, 000 120, 000 $420, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 28

Subsidiary With Convertible Preferred Stock Plant’s Income for 2003 Income from Plant’s operations Income from Seed ($50, 000 – $10, 000 preferred income) × 90% Plant net income $150, 000 36, 000 $186, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 29

Subsidiary Preferred Stock Convertible into Subsidiary Common Seed’s preferred stock is convertible into 12, 000 shares of Seed’s common stock. Neither Plant nor Seed has any other potentially dilutive securities outstanding. Seed’s diluted EPS: $50, 000 ÷ (20, 000 + 12, 000) = $1. 5625 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 30

Subsidiary Preferred Stock Convertible into Subsidiary Common Plant’s Diluted EPS Net income of Plant Replacement of Plant’s equity in Seed’s realized income ($40, 000 × 90%) with Plant’s equity in Seed’s diluted earnings (18, 000 × $1. 5625) Plant’s diluted earnings = a Plant’s outstanding shares = b Plant’s diluted EPS = a ÷ b $186, 000 – 36, 000 28, 125 $178, 125 200, 000 $ 0. 89 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 31

Subsidiary Preferred Convertible into Parent Company Common Seed’s preferred stock is convertible into 24, 000 shares of Plant’s common stock. Neither Plant nor Seed had other potentially dilutive securities outstanding. Seed’s diluted EPS is $2 ($40, 000 income to common ÷ 20, 000 common shares). What is Plant’s diluted EPS? © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 32

Subsidiary Preferred Convertible into Parent Company Common Net income of Plant Add: Income to preferred stockholders of Seed assumed to be converted Plant’s diluted earnings = a Plant’s outstanding shares Add: Seed’s preferred shares assumed converted Plant common shares and common stock equivalents = b Plant’s diluted EPS = a ÷ b $186, 000 10, 000 $196, 000 200, 000 24, 000 224, 000 $ 0. 88 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 33

Subsidiary With Options and Convertible Bonds Paddy’s income 2003 Own operations $1, 500, 000 Syd’s operations $ 300, 000 Syd is 80% owned by Paddy. 80% × $450, 000 Syd net income 80% × $50, 000 unrealized profit Amortization Income from Syd $360, 000 – 40, 000 – 20, 000 $300, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 34

Subsidiary With Options and Convertible Bonds Paddy: Common stock, 1, 000 shares Syd: Common stock, 400, 000 shares Options to purchase 60, 000 shares of stock at $10 per share (average market price is $15 per share) 7% convertible bonds, $1, 000 par outstanding, convertible into 80, 000 shares of common stock © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 35

Options and Bonds Convertible into Subsidiary Common Stock Syd’s income to common stockholders Less: Unrealized profit on sale of land Add: Net-of-tax interest expense assuming bonds converted into subsidiary shares ($1, 000 × 7% × 66% net of tax) Subsidiary adjusted earnings = a $450, 000 – 50, 000 46, 200 $446, 200 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 36

Options and Bonds Convertible into Subsidiary Common Stock Syd’s common shares outstanding Incremental shares 60, 000 – ($600, 000 ÷ $15) Additional shares assuming bonds converted into subsidiary shares Syd’s adjusted shares = b Syd’s diluted EPS = a ÷ b ($446, 200 ÷ 500, 000) 400, 000 20, 000 80, 000 500, 000 $ 0. 89 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 37

Options and Bonds Convertible into Subsidiary Common Stock Paddy’s income to common stockholders Replacement of Paddy’s equity in Syd’s realized income ($400, 000 × 80%) with Paddy’s equity in Syd’s diluted EPS (320, 000 × $0. 89) Paddy adjusted earnings = a $1, 800, 000 Paddy outstanding shares = b Paddy’s diluted EPS = a ÷ b 1, 000 $ 1. 76 – 320, 000 284, 800 $1, 764, 800 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 38

Options and Bonds Convertible into Parent’s Common Stock Paddy’s income to common stockholders Add: Net-of-tax interest expense assuming bonds were converted into shares ($1, 000 × 7% × 66% net-of-tax effect) Paddy’s adjusted earnings = a $1, 800, 000 46, 200 $1, 846, 200 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 39

Options and Bonds Convertible into Parent’s Common Stock Paddy’s common shares outstanding Incremental shares 60, 000 – ($600, 000 ÷ $15) Additional shares assuming bonds are converted into parent shares Paddy’s adjusted shares = b Paddy’s diluted EPS = a ÷ b ($1, 846, 200 ÷ 1, 100, 000) 1, 000 20, 000 80, 000 1, 100, 000 $ 1. 68 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 40

Learning Objective 3 Understand the complexities of accounting for income taxes by consolidated entities. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 41

Accounting for Income Taxes of Consolidated Entities An affiliated group exists when a common parent corporation owns at least 80% of the voting power of all classes of stock and 80% or more of the total value of all outstanding stock of each of the includable corporations. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 42

Accounting for Income Taxes of Consolidated Entities A consolidated entity that is an affiliated group may elect to file consolidated income tax returns. All other consolidated entities must file separate income tax returns for each affiliated company. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 43

Advantages of Filing Consolidated Returns 1 Losses are offset against income between members. 2 Intercorporate dividends are excluded from taxable income. 3 Intercompany profits are deferred from income until realized. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 44

Disadvantages of Filing Consolidated Returns 1 Decrease in flexibility. 2 Commitment to consolidated returns year after year. 3 Deconsolidated corporations cannot rejoin the group for 5 years. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 45

Income Tax Allocation FASB Statement No. 109, “Accounting for Income Taxes, ” is the primary source of GAAP for accounting for income taxes. Events that have future tax consequences are designated temporary differences. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 46

Income Tax Allocation The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year and to recognize deferred tax liabilities and assets for the tax consequences of events that have been recognized in the financial statements or tax returns. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 47

Accounting for Distributed and Undistributed Income Parson owns a 30% interest in Seaton Corporation, a domestic corporation. Seaton reports $600, 000 net income and pays dividends of $200, 000. The income tax rate is 34%. What is Parson’s share of Seaton’s income? © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 48

Accounting for Distributed and Undistributed Income Share of distributed earnings (dividends) ($200, 000 × 30%) Share of undistributed earnings (retained earnings increase) ($400, 000 × 30%) Equity in Seaton’s earnings $ 60, 000 120, 000 $180, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 49

Accounting for Distributed and Undistributed Income The income tax expense equals income tax liability for the dividends received. $60, 000 × 20% taxable × 34% tax rate = $4, 080 December 31, 2003 Income Tax Expense 8, 160 Deferred Income Taxes 8, 160 To provide for taxes on undistributed earnings ($120, 000 × 20% × 34% = $8, 160) © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 50

Unrealized Gains and Losses from Intercompany Transactions Unrealized and constructive gains and losses create temporary differences that may affect deferred tax calculations when filing separate income tax returns. This is not the case when filing consolidated returns. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 51

Separate Company Tax Returns with Intercompany Gain Paco Corporation paid $375, 000 for a 75% interest in Step on January 1, 2003. Step’s equity consisted of $300, 000 capital stock and $200, 000 retained earnings. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 52

Separate Company Tax Returns with Intercompany Gain Paco had a deferred tax liability of $10, 200, consisting of $30, 000 tax/book depreciation differences that reverse in equal ($7, 500) amounts over the years. On January 8, 2003, Paco sold equipment to Step at a gain of $20, 000. Step is depreciating the equipment over five years (S/L). © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 53

Separate Company Tax Returns with Intercompany Gain 12/31/2003 Sales Gain on equipment sale Income from Step Cost of sales Operating expenses Income tax expense Net income Add: Beginning retained earnings Deduct: Dividends (December) Retained earnings 12/31/2003 Paco $380, 000 23, 600 – 200, 000 – 100, 000 – 31, 253 $ 92, 347 357, 653 – 50, 000 $400, 000 Step $300, 000 – – – 180, 000 – 40, 000 – 27, 200 $ 52, 800 200, 000 – 28, 000 $224, 800 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 54

One-Line Consolidation January 1, 2003 Investment in Step 375, 000 Cash 375, 000 To record purchase of 75% interest December 2003 Cash 21, 000 Investment in Step To record dividends received 21, 000 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 55

One-Line Consolidation December 31, 2003 Investment in Step 23, 600 Income from Step 23, 600 To record income from Step Paco’s share of Step net income ($52, 800 × 75%) $39, 600 Less: Unrealized profit – 20, 000 Add: Piecemeal recognition of gain 4, 000 Income from Step $23, 600 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 56

Schedule of Deferred Income Tax Liability Temporary Difference 2003 Depreciation Gain on equipment $20, 000 Piecemeal recognition – 4, 000 Future dividends – 3, 720 Taxable in future years Enacted tax rate Deferred tax liability 2004 -7 $ 7, 500 Future Years – 4, 000 – $3, 720 $ 3, 500 $3, 720 34% $ 1, 190 $1, 265 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 57

Business Combination Taxable combination Tax-free reorganization © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 58

Business Combination In a purchase business combination, the cost/book value differential is allocated to the assets and liabilities acquired at gross fair values, and a deferred tax asset or liability is recorded for the related tax effect. © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 59

Financial Statement Disclosures for Income Taxes GAPP divides deferred assets or liabilities. Current Noncurrent © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 60

Financial Statement Disclosures for Income Taxes GAPP requires disclosure for income tax expense and benefits allocated to: Continuing operations Discontinued operations Extraordinary items Cumulate effect type Prior period adjustments © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 61

End of Chapter 10 © 2003 Prentice Hall Business Publishing, Advanced Accounting 8/e, Beams/Anthony/Clement/Lowensohn 10 - 62