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Analysis of Income Taxes

The meeting focused on explaining the differences between financial reporting standards and tax standards, particularly in how income is calculated and reported. Anis discussed various tax-related concepts including taxable income, taxes payable, income tax expense, and depreciation methods, while highlighting how these differences can impact taxable income and tax liability. The discussion also covered the concepts of deferred tax liability and assets, as well as the differences between financial accounting and tax accounting, including timing differences and valuation allowances. Summary Financial Reporting vs Tax Standards Anis discussed the importance of understanding the differences between financial reporting standards and tax standards, particularly in the context of income tax calculations. They explained that financial reporting standards, such as IFRS, calculate income based on accrual basis, while tax standards, like the Bangladesh Income Tax Act, use a cash basis. Anis emphasized that this topic is crucial for financial accounting and reporting, and highlighted the complexity of the subject. Tax Concepts in Financial Reporting Anis discussed financial reporting standards, focusing on tax-related concepts such as taxable income, taxes payable, and income tax expense. He explained the difference between taxes payable and actual tax payments, including the possibility of tax refunds. Anis also touched on the topic of tax loss carry forward, highlighting that companies may not always have profits and can benefit from tax advantages provided by authorities. Depreciation and Taxable Income Impact Anis discussed financial accounting concepts, focusing on depreciation methods and their impact on taxable income. He explained the differences between accounting profit and taxable income, highlighting that accelerated depreciation can result in higher depreciation charges in the early years, which can reduce taxable income and tax liability. Anis also touched on the time value of money and how earlier savings are more beneficial. Income Tax Concepts and Adjustments Anis explained the concept of income tax expense, which includes taxes payable and changes in deferred tax assets. He clarified that deferred tax liability is a liability on the balance sheet, while deferred tax assets represent future cash inflows. Anis also discussed valuation allowances, which can reduce the deferred tax asset to a lower amount, such as from 60,000 to 70,000. Understanding Tax and Financial Accounting Anis discussed the differences between financial accounting and tax accounting, focusing on depreciation methods, warranty provisions, and the recognition of revenue and expenses. He explained how these differences can lead to temporary and permanent timing differences, which affect the calculation of taxable income and income tax expense. Anis also covered the concept of deferred tax liability and asset, using examples to illustrate how these are calculated and reported in financial statements.