If a taxation authority amends a company's assessment, the company should:
A) Debit income tax expense if more tax needs to be paid;
B) Credit income tax expense if less tax needs to be paid;
C) Analyse the reason for the adjustment and consider whether both current and deferred tax are affected;
D) Treat the adjustment as a prior period adjustment.

Question

Quizplus · Accepted Answer

The company should analyze the reason for the adjustment to assess whether both current and deferred tax are affected. This will help in determining how to account for the adjustment in their financial statements. Options A and B may be applicable depending on whether more or less tax needs to be paid, but the first step should be to analyze the reason for the adjustment. Option D is not appropriate as this is not a correction of an error from a prior period, but rather a current adjustment to the tax assessment.

If a Taxation Authority Amends a Company's Assessment, the Company