ABSTRACT

This case guides students through the process of reconciling financial (book) income to its taxable income, calculating the tax provision, preparing the income tax footnote disclosure, and completing Form 1120, Schedule M-1 for a fictitious publicly traded client. In the case, students are presented with the company's financial statements, including supporting schedules, and a tax basis balance sheet. Students are asked to calculate the tax provision and construct the income tax footnote as a pre-class assignment. In class, students debrief the tax provision calculation and income tax footnote and use information contained in the income tax footnote to reconcile the company's book to taxable income. Students completing this case should be able to (1) interpret the differences between a book basis balance sheet and a tax basis balance sheet, (2) create the income tax footnote disclosure using the ASC 740 balance sheet approach to accounting for income taxes, and (3) use information in the financial statement footnote and related disclosures to determine a company's book-tax differences and reconcile its book to taxable income. This case is designed for an intermediate financial accounting or tax course but an advanced version of the case could be used in a graduate financial accounting or graduate tax course.

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