ECON 25000 Lecture Notes - Lecture 9: Tax Rate, Credit Risk, Special Purpose Entity

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Liabilities: off-balance-sheet financing, retirement benefits and income taxes. Off balance sheet financing: obtaining cash or other assets or services without a borrowing arrangement that qualifies for liability recognition under us gaap or ifrs. You must identify the party that enjoys the economic benefits of the resource in each transaction and bears the economic risk of holding it. Off balance sheet: entity that provides financing also controls benefits and risks. Special purpose entity (variable interest entity): legally separate entity whose sole purpose is to hold the receivables and issue claims on their cash flows. Effective tax rate= income tax expense/ pretax book income. Book income includes revenues or expenses that taxable income never includes. Book income includes revenue or expenses in a different period from taxable income. Income tax expense: amount recorded in calculating book income. Debit income tax expense, credit income tax payable, debit/credit deferred tax liability.

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