this presentation about accounting for taxes with some examples and also calculations.

1. Accounting for Taxes
Income Tax
By
Richard Handoko
Zane Baity
Calistavania Hastapustaka
Bima Samudera
Muhammad Heickal

2. Accounting For Income Taxes
 Accrual Basis VS Cash Basis
Pretax Financial Income  Taxable Income
Income Tax Expense  Income tax Payable

3. Amount reported as tax expense
will often differ from the amount of
taxes payable to the taxing
authority.

4. Example
 Prambaru, Inc. reported revenues of Rp130m and expenses of Rp60m in each of
its first three years of operations. For tax purposes, Prambaru reported the same
expenses to the tax authority in each of the years. Prambaru reported taxable
revenues of Rp100m in 2012, Rp150m in 2013, and Rp140m in 2014.

5. Calculation

6. Comparison

7. Temporary Differences vs Permanent
Differences

8. Permanent Differences
 Substantive differences
 It will appear every time

9. Example
 Donation
 Benefit in Kind
 Cost to get and protect the income of Companies

10. Temporary Differences
 Different time recognition
 No differences, but income recognition
 Or there are differences expense in a period of time

11. Example
 Amortization / depreciation
 Inventory Valuation
 Differences in income statement because of the change of exchange
rates
 Differences income statement based on Stock

12. Deferred Tax Liabilities and Deferred Tax Assets

13. Temporary Differences
 Future taxable amounts pay less now pay more in the future. This will result
in:
 Deferred Tax Liability represents the increase in taxes payable in future years as
a result of taxable temporary differences existing at the end of the current year

14. Temporary differrences
 Future deductible amounts pay more now, pay less later. This will result in:
 Deferred Tax Asset represents the increase in taxes refundable (or saved) in
future years as a result of deductible temporary differences existing at the end of
the current year.

15.  The differences happen due to accrual basis and cash basis

16.  SC Corporation has one temporary difference at the
end of 2007 that will reverse and cause taxable amounts
of $55,000 in 2008, $60,000 in 2009, and $65,000 in 2010.
South Carolina’s pretax financial income for 2007 is
$300,000, and the tax rate is 30% for all years. There are
no deferred taxes at the beginning of 2007.
a) Compute taxable income and income taxes payable for 2007.
b) Prepare the journal entry to record income tax expense, deferred income taxes,
and income taxes payable for 2007.

17. Deferred tax liability example
Current Yr.
INCOME: 2007 2008 2009 2010
Financial income 300,000
Temporary Diff. (180,000) 55,000 60,000 65,000
Taxable income 120,000 55,000 60,000 65,000
Tax rate 30% 30% 30% 30%
Income tax 36,000 16,500 18,000 19,500
b. Income tax expense 90,000
Income tax payable 36,000
Deferred tax liability 54,000

18. Deferred Tax Assets example
 AnuGerah Corporation has one temporary difference at
the end of 2007 that will reverse and cause deductible
amounts of $50,000 in 2008, $65,000 in 2009, and $40,000
in 2010. Columbia’s pretax financial income for 2007 is
$200,000 and the tax rate is 34% for all years. There are
no deferred taxes at the beginning of 2007. Columbia
expects to be profitable in the future.
a)Compute taxable income and income taxes payable for 2007.
b)Prepare the journal entry to record income tax expense, deferred
income taxes, and income taxes payable for 2007.

19. 19
Taxable income (IRS) 55,000 50,000 65,000 40,000
Tax rate 34% 34% 34% 34%
Income tax 18,700 17,000 22,100 13,600
b. Income tax expense 18,700
Deferred tax asset 52,700
Income tax payable 71,400
Anugerah Corporation
a.
a.

20. Transaction
When recorded
in books
When recorded
on tax return
Deferred
tax effect
Rev or Gain Earlier Later Liability
Rev or Gain Later Earlier Asset
Exp or Loss Earlier Later Asset
Exp or Loss Later Earlier Liability
Summary of Temporary Differences

21. Carryback
 An accounting technique with which a company retroactively applies net
operating losses to a preceding year's income in order to reduce tax
liabilities present in that previous year.
 Carryback is not allowed in Indonesia

22. Carryforward
 An accounting technique that applies the current year's net operating
losses to future years' profits in order to reduce tax liability.
 Carryforward is regulated by UU No.36 Tahun 2008

23. Carryforward
 Aritcle 6 (2):
 Apabila penghasilan bruto setelah pengurangan sebagaimana dimaksud pada
ayat (1) didapat kerugian, kerugian tersebut dikompensasikan dengan
penghasilan mulai tahun pajak berikutnya berturut-turut sampai dengan 5 (lima)
tahun.
 If the gross income after deducted with what has been regulated in section 1
resulting in a loss, then the loss can be compensated with earnings from the next
year up to the next 5 (five) years.
 Article 31A point c:
 kompensasi kerugian yang lebih lama, tetapi tidak lebih dari 10 (sepuluh) tahun.
 Longer loss compensation, but no more than 10 (ten) years.

24. Carry forward Example
 In 2013 PT XYZ has a net loss of Rp 50,000,000 and in 2014 the net income is
Rp 100,000,000. What is the tax that should be paid in 2013 and 2014 by PT.
XYZ

25. Carry forward Example
 Tax payable in 2013 is Rp 0
 Tax payable in 2014
(Rp 100,000,000 – Rp 50,000,000) x 25% = Rp 12,500,000

26. Applying tax rates
 Basic rule: Apply the yearly tax rate to calculate deferred tax effects
 If future tax rates change: use the enacted tax rate to apply in the
future year.
 If the new rates are not enacted yet into law for future years, the
current rate should be used.

27. Revision of Future Tax Rates
 When a change in tax rate is enacted, its effect should be recorded
immediately
 The effect is reported as an adjustment to tax expense in the period
of change

28. Example
 On December 10, 2012, corporate tax rate is changed from 40% to 30%.
 The new rate will enacted in January 1, 2014.
 the deferred tax account at the beginning of 2012 is as follows:
o Excess tax depreciation: Rp 3.000.000.000
o Deferred tax liability : Rp 1.200.000.000 (at beginning 2012)
o Related taxable amounts are expected to occur equally over 2013, 2014, and
2015
 Provide the journal entry to reflect the change!

29. 2013 2014 2015 Total
Future
taxable
amounts
1.000.000.000 1.000.000.00
0
1.000.000.000 3.000.000.00
0
Tax rate 40% 30% 30%
Deferred tax
liability
400.000.000 300.000.000 300.000.000 1.000.000.00
0
• 1.200.000.000 – 1.000.000.000 = 200.000.000
• Entry:
Deferred Tax Liability 200.000.000
Income Tax Expense 200.000.000

30. Discussions
 Refqi
 Valdo
 Syifa
 Daniyyah
 Annisa A
 Gerald
 Anne