Accounting Knowledge Only, Journal Entries 4 Pages.

Global Multinational Corporation

In certain countries, the tax rate applied to a company’s tax return reporting income depends upon whether the profits for the period are distributed or undistributed. Amounts are initially taxed at the higher rate, but a tax credit is received when the profits are distributed. Therefore, companies need to determine what rate (distributed versus the undistributed tax rate).

Global Multinational Corporation (Global) is a U.S. company that owns and operates 100% of a consolidated subsidiary in a foreign jurisdiction where income taxes are payable at a higher rate on undistributed profits than on distributed earnings. For the year ending December 31, Year 1, Global’s foreign subsidiaries taxable income is $150,000. Global’s foreign subsidiary also has net taxable temporary differences amounting to $50,000 for the year, thus creating the need for a deferred tax liability on the balance sheet. The tax rate on distributed profits is 40%, and the tax rate on undistributed profits is 50%; the difference results in a credit if profits are distributed in the future. At the date of the balance sheet, no distributions have been proposed or declared. On March 31, Year 2, Global’s foreign consolidated subsidiary distributes dividends of $75,000.

Required:

1. Obtain      and review the accounting and measurement guidance related to anticipated      tax credits in IAS12, Income Taxes, and in Sections 25 and 30 of      ASC740-10, Income Taxes-Overall. Document the relevant portions of the      IFRS and US GAAP related to the accounting Global must follow for the      above series of transactions.
2. Provide      the required journal entries for both Year 1 and Year 2 under both the US      GAAP and IFRS for each respective date where you are provided information      in the above scenario. In your explanation for each journal entry, make      sure you document the basis for each journal entry amount. In other words,      how did you obtain the figures? In addition, provide a detailed      explanation for each respective journal entry with the appropriate      Reference(s) to IAS12 and ASC 740-10, respectively.

Requirements:

• Write      a paper of 4 pages in length, not counting the title and reference pages,      which you must include.
• Use      terms, evidence, and concepts from class readings, including professional      business language.
• Cite      at least 5-6 credible, academic or professional sources for this      assignment, outside of the textbook. Format your paper according to APA      format.

References:

Cecchini, M., Leitch, R., & Strobel, C. (2015). Transfer pricing: Factors to consider. Journal of Corporate Accounting & Finance, 26(6), 5-11.

Ernst & Young Foundation. (2017). Accounting for income taxes — differences between the US GAAP and IFRS (PowerPoint presentation).