3. Determining the Tax Base of Assets and Liabilities
c. calculate the tax base of a company's assets and liabilities;
e. evaluate the impact of tax rate changes on a company's financial statements and ratios;
What is the definition of the tax base for an asset or liability?
The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.
What is the tax base of an asset?
An asset's tax base is the amount that will be deductible for tax purposes against any taxable economic benefits that will flow to an entity when it recovers the asset's carrying amount. It is the amount that would be tax deductible if the asset was sold on the balance sheet date.
What is the tax base of a liability?
The tax base of a liability is its carrying amount, less any amount that will be deductible for tax purposes with respect to that liability in future periods.