6. Consider the following excerpts from the balance sheet and income statement of Kane Plc. Kane Plc. reportsunder IFRS.Amounts in £Capitalized development costs (net)Research expenses*2,000350Amortisation of capitalised development costs400*Amounts spent in researching a new drug, whose technological and commercial feasibility has not yet beenestablished.2022ANSWER: B2,3004205002021If Kane Plc. had to report under U.S. GAAP instead, its income before taxes for fiscal year 2022 would be:a. Higher by £300b. Lower by £300c. Lower by £720d. Lower by £500e. None of the above

Under IFRS, research costs are expensed as incurred, but development costs can be capitalized when…

If Kane Plc. had to report under U.S. GAAP instead, its income before taxes for fiscal year 2022 would be: a. Higher by £300 b. Lower by £300 c. Lower by £720 d. Lower by £500 e. None of the above

If Kane Plc. had to report under U.S. GAAP instead, its income before taxes for fiscal year 2022 would be: a. Higher by £300 b. Lower by £300 c. Lower by £720 d. Lower by £500 e. None of the above

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.

Question

6. Consider the following excerpts from the balance sheet and income statement of Kane Plc. Kane Plc. reports
under IFRS.
Amounts in £
Capitalized development costs (net)
Research expenses*
2,000
350
Amortisation of capitalised development costs
400
*Amounts spent in researching a new drug, whose technological and commercial feasibility has not yet been
established.
2022
ANSWER: B
2,300
420
500
2021
If Kane Plc. had to report under U.S. GAAP instead, its income before taxes for fiscal year 2022 would be:
a. Higher by £300
b. Lower by £300
c. Lower by £720
d. Lower by £500
e. None of the above

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