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28Q

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Intermediate Accounting (Kieso)
Found in: Page 180

Short Answer

When does tax allocation within a period become necessary? How should this allocation be handled?

Tax allocation within a period is helpful to provide the accurate results of specific transactions showing a net of all effects.

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Step by Step Solution

Meaning of Tax allocation

Tax allocation identifies differences between accounting for tax purposes and business purposes.

Explanation for intra period tax allocation

When a firm has discontinued operations, extraordinary items, and correction of errors, tax allocation within a period (intra period) become necessary.

Explanation for handling allocation

This allocation is essential to establish a relationship between income tax expense and continuing operations, discontinued operations, extraordinary items, and income before extraordinary items. It helps in presenting the financial reports more clearly and factually.

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