Homestake Mining Company Homestake Mining Company is a 120-year-old internationa
ID: 2539957 • Letter: H
Question
Homestake Mining Company Homestake Mining Company is a 120-year-old international gold mining company with substantial gold mining operations and exploration in the United States, Canada, and Australia. At year-end, Homestake reported the following items related to income taxes (thousands of dollars). $ 26,349 (39436 S(13,087) $303,050 95,275 $207,775 Total current taxes Total deferred taxes Total income and mining taxes (the provision for taxes per its income statement) d tax liabilities Deferred tax assets, net of valuation allowance of $207,175 Net deferred tax liability Note 6: The classification of deferred tax assets and liabilities is based on the related asset or liability creating the deferred tax. Deferred taxes not related to a specific asset or liability are classified based on the estimated period of reversal. Tax loss carryforwards (U.S., Canada, Australia, and Chile) Tax credit carryforwards $71,151 $12,007 What is the significance of Homestake's disclosure of "Current taxes" of $26,349 and "Deferred taxes" of $(39,436)? Explain the concept behind Homestake's disclosure of gross deferred tax liabilities (future taxable amounts) and gross deferred tax assets (future deductible amounts). Homestake reported tax loss carryforwards of $71,151 and tax credit carryforwards of $12,007. How do the carryback and carryforward provisions affect the reporting of deferred tax assets and deferred tax liabilities?Explanation / Answer
(a) (1) significance of home stake disclosure of current taxes $ 26349
the current tax is the tax payable on profits for the year. a company profit are subject to corporation tax. from the accural concept the tax expence and current tax liability are recognised in the period they arise not necessary when the tax itself is paid.so although the corporation tax may not get paid until next year it shoud be recognised in the financial statement this year.
(2) the deferred tax is the tax that the company may be allowed to carry forward losses to reduce its tax bill in the future . the company can carry forward losses to use against profit in the future year.
(b)
(1) gross deferred tax assets
the disclosure of gross deferred tax assets is the deferred tax assets help in reducing the company future tax liability. the deferred tax assets arise is where there is differecne between accounting rules and tax rules. the deferred tax assets carry over losses.
(2) gross deferred tax liability
the deferred tax liability records the fact that the company will in the future pay more income tax because of transcation that took place during current period
(c) carryback and carryforward provision affect the reporting of deferred tax assets and deferred tax liabilities
the enterprise recognise the tax benefit produced by the carry back of the tax losses and credits.
the carryforward represent the potential for tax saving based on the occurrence of past event and benefit has been blocked by same limitation
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