AFM202 Lecture Notes - Lecture 9: General Insurance, Life Insurance, Tax Credit

• School: University of Waterloo
• Department: Accounting & Financial Management
• Course: AFM202
• Professor: Alan Mc Naughton

Document Summary

Fleming sections 6. 1 and 6. 2 is a second pass on this. Different ways to compute income for tax purposes: Add: items deductible for book but not for tax (book depreciation, golf, etc. ) charitable donations: deductible for tax, but in division c items included in income for tax but not included in book income (net taxable capital gains) Deduct: items deductible for tax but not for book (cca, abil, anything capitalized for book but not for tax) Inventory must be written down to the lower of cost or market value for tax purposes. Lifo valuation method is not allowed for tax purposes. Reserve for estimated warranty expense or allowance for uncollectible accounts receivable is not deductible. As opposed to capital gains, employment, other income. Key tests for deductibility: earn income (no charitable, political; but expenses of representation) Capital expense is not deductible (many varieties of this). New angles: write downs of impaired long -term assets, stock option expense.