The paper 'Treatment of Government Grant' is a great example of finance and accounting assignment. Warranty expenses are whereby income tax expense less than the tax payable the reason being that on the income statement, the anticipated warranty is deductable and on tax returns just actual warranty expenses are deductible. Treatment of government grant is that if the grant is related to assets, then it is recorded in the statement of financial position of the company as a deduction from the face value of the same assets or as differed income. Therefore, the treatment of government grants and warranty should not appear in the current worksheet as they are considered nontaxable deduction only if the terms and conditions of the grant are upheld. The temporary difference is arrived by taking the difference between the taxable value and the carrying amount.
The difference is then subjected to 30% taxation and taken to current tax in determining the balancing figure in the current tax account as the deferred tax. This amount is treated as taxable temporary differences because the recoverability of a carrying amount is made through payment of tax and thus the emergence of deferred taxesThe company should recognize a provision for deferred tax liability and assets for all temporary differences with certain exceptions in the statement of financial position as laid down.
therefore the tax consequences of the future are well-taken care off in that the accrual concept is adhered to, there is no subjectivity in calculating differed tax in case of partial provision and thus manipulation of tax amount is reduced. Deferred taxes are a long-term debt to be paid by the company in the near future.
Usually, it is an agreement between the company and the revenue authority on an amount of tax payable to be treated as deferred. Do factors need to be considered in determining whether an entity should prepare consolidated financial statements? A consolidated financial statement is prepared by the parent company in which it owns shares more than 50% shares in another company. This is because the parent company controls the voting right and also is responsible for the transfer of goods from the head office which is always a cost and thus some element of unrealized profit should have to be eliminated while converting goods transferred from mark up to margin.
This, therefore, means that holding the company should consolidate the books of account. Reasons for preparation of acquisition analysis on consolidationThis is important in that it helps in determining the parent's goodwill on the acquisition of a company. This is done by comparing the cost of investment with the parent share of net assets at the date of acquisition. The goodwill can either be tested for impairment or depending on the terms of the acquisition.
The dividend of a subsidiary company belongs to both the holding company and non-controlling interest. The dividend can be of two types ofinterim paid and final proposed. This should be ignored and should never be presented in either group income statement or statement of changes in equity because non-controlling interest share is included profit attributable to N. C.I in an income statement while the share of the parent company is inter-company income and should be ignored. The proposed dividend in the subsidiary company belongs to the holding company and N. CI.
the share that belongs to the holding company is an inter-company balance and should be excluded from the group statement of financial position. The share that belongs to N. C.I am still a current liability.