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IFRS accounting standard on accounting for income taxes
Locate the IFRS accounting standard on accounting for income taxes (IAS 12) using the instructions in your course outline, and Canadian Pacific Railway Limited’s “Audited Annual Financial Statements” for its year ended December 31, 2015 filed with SEDAR on February 29, 2016. (SEDAR.com. Then choose English/Issuer Profiles – for companies). Be careful in choosing the statements, as there are a few companies with names similar to Canadian Pacific Railway Limited. Answer the following questions related to either the IFRS standard or to Canadian Pacific’s 2015 financial statements or both. Point form can be used to good advantage.
- In your own words, summarize what the accounting standard indicates is its objective in accounting for income taxes, and where you found this information.
- Write a brief note to an accounting student who has never studied income taxes before, about how this objective can be related to the asset and liability view of accounting.
- Review the structure of the IAS 12 standard which corresponds, or would correspond, to an Index to this accounting standard. Find the section on Disclosures and review the income tax information requiring separate disclosure. (For purposes of this assignment, limit yourself to the bold or bolded Disclosure paragraphs with the exception of the details provided about the first required disclosure.)
Then, review the primary financial statements of Canadian Pacific Railway Limited and Note 6 to the financial statements that deals with Income Taxes. The “primary” financial statements you should review are the statement of income, statement of comprehensive income, balance sheet, and statement of cash flow.
- Set up columns on your Excel worksheet. In column 1, list (identify) all the income tax disclosures made by the company on each of the primary financial statements identified above. In column 2, beside each disclosure identified, indicate the paragraph number of IAS 12 that requires that specific disclosure.
- Continuing in column 1, identify the types of disclosures made in Note 6 to the financial statements. Don’t list each line item reported by the company, but instead, identify the type or category or segment of information disclosed. For each type of disclosure identified, indicate the paragraph number and parts of the paragraph that require that disclosure.
- Write a short summary of the extent to which you conclude that Canadian Pacific Railway Limited complied/didn’t comply with the IFRS accounting standard.