Accounting in Action: CM2

Chapter 19 Accounting in Action: CM2 When you arrive at CM2forthe afternoon, Connerand Martin are arguing with Lopez and Knepp about, of all things, the corporate income taxes. As you walk in, you hear Conner saying, "The corporate rate is always 35%." For some reason, Knepp is talking about something called SFAS No. 109 that has to do with how taxes are reported in financial statements (deferred taxes). This discussion is not clear to you since you have not yet had a tax course, so you figure you will learn a lot this aftemoon. (You had no idea at this point how much you would learn.) Instructions Access File 4a to perform the following analysis (Excel File). This file contains the balance sheet and income statement reflecting forecasts for 2013. Review the income statement and verifv that the tax is indeed 350/o of income before tax for both 2012and2013. (a) V Since Knepp has raised the issue of SFAS No. 709, access the FASB Codification and read the information describing the framework now used in accounting for income taxes. Write a memo that you can take to Conner and Martin describing the change in focus from the income statement to the balance sheet. Describe the concepts of permanent and temporary differences. Give two examples of each and how they reflect the new focus. Continuing Case 3