TAX 9873 Lecture Notes - Lecture 33: Tax Deduction, Employee Retirement Income Security Act, Unrelated Business Income Tax

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20 Dec 2019

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Date of disability pension plans can be amended: grandfathered benefits(layers of benefits) frozen plans: reason vs terminate terminate you have to fully fund unfunded liab(and company"s usually don"t have assets to do this so they freeze) Unfreeze work unfunded to be funded then terminate know when person entered plan. The employer gets a tax deduction when the contributions are made to the plan. The investment income on the assets in the plan is not taxed. Plan qualified under 401, trust exempt from tax under 501. The employee is not taxed until they receive the benefit. The amount deductible under irs 404 must first be deductible under irs 162 as ordinary and necessary business expense. Must be based on compensation paid or accrued for services actually rendered; payment for future services is not to be included. Contributions must actually be paid to the plan. The plan must be written, communicated to employees, and in effect by year end.

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Choose a publicly traded company that interests you. If you don't know how to choose a company, think of IBM, DELL computer, Nike, Apple computer, GM, Ford, Nokia, Home Depot, and on and on. Think of the companies that make things you use everyday. Choose one from them. Part A. Go to COMPUSTAT Research Insights, Reuterï¿½s, Thomson Financial Service, or Bloomberg Financial (E-Trade Financial Learning Center has them all) or any other financial database such as Yahoo Finance to download the historical closing prices (five years) of your company on the monthly basis (twelve data points a year). Use Microsoft Excel to chart the historical prices (like the one below) based on the monthly data. Part B. Based on the financial statements of the latest available annual report, calculate the following financial ratios using only one year data. If the ratios are not available, please explain why. For example, Citibank doesnï¿½t have inventory because itï¿½s a financial company. (Please use spreadsheet software (MS Excel) for this part and show your calculation) Current ratio Quick ratio Fixed assets turnover Total assets turnover Total debt to total assets Profit margin on sales Return on total assets Return on common equity Price/earnings ratio Market/book ratio The final report should include a chart of monthly stock price movements described in part A and the financial ratios in part B above. Based on the materials provided in the annual report and business news from The Wall Street Journal, as well as the financial information from any other sources, such as Datastream, Reuters, and Bloomberg Financial, explain as much as you can the movement of your stock during the last twelve months. Your report should start with a description of the business and the status of financial condition such as Line of business, Competitive positions, and Profitability History (going back five years). Do not turn in a sloppy, rapidly completed report. All papers should have a title page, a table of contents, a statement of purpose, footnotes or endnotes, or a bibliography or reference. The due date for submitting your project is the last date of the class. You will use Assignment manager to submit your project.

bronzecicada119

Read the Interview for the Miss Peach Project below and write asystems requirement checklist with these five general catagories:Outputs, Inputs, Processes, Performance and controls.

In a prior interview, Miss Peach provided the informationsummarized below. She has also provided associated documentationshe thought might be helpful.

Payroll

Currently Miss Peach pays her students $3 each Monday usingpaper money for doing their assigned chores during the week. Shethen charges them $1 for rent on their desks. She also pays bonusesfor bringing in homework (about $8 a week) and for good behavior($1 a day).

This works pretty well as far as it goes, but Miss Peach wouldlike to model real life even more. With the new system, thestudents' pay would be posted to their bank accounts. In order forthe tax tables to work, Miss Peach will have to increase the weeklysalaries to about $150. Each week the students would receive anearnings statement that would list their gross pay (broken down bysalary, bonuses, and hourly pay), their current deductions (Federalincome tax, Social Security tax, Medicare tax, and Michigan stateincome tax), and their net pay deposited into their bank account.The rent for their desks would be inflated to $25 and would be anautomatic deduction from the students' weekly pay. There would alsobe a column indicating the year-to-date values.

Although Miss Peach currently does not pay an hourly wage, shewould like the option to do so at a later time.

Miss Peach has included a copy of her weekly earnings statementto be used as a model.

Earnings Statement

Kelly Elementary School

5150 Riverside Drive

Marshall, MI 49068

Period Ending:9/24/2004

Pay Date: 9/24/2004

Taxable Marital Status: Single

Exemptions/Allowances:

Federal: 1

State: 1

Pamela Peach

135 Grove Street

Marshall, MI 49068

Earnings	rate	hours	this period	year to date
Regular	650.00		650.00	2,600.00
	Gross Pay		650.00	2,600.00

Deductions	Statutory
	Federal Income Tax		-70.73	282.92
	Social Security Tax		-40.30	161.20
	Medicare Tax		-9.43	37.72
	MI State Income Tax		-22.88	91.52

	Other
	Direct Deposit		-506.66	2,026.64

	Net Pay		$0.00

Store

Currently Miss Peach opens the class store Monday, right afterpayday. She runs the store herself, but would like the new systemto support students running the store. She keeps the inventorystocked fairly well considering her limited time and resources. Shemostly uses standard school supplies (see list below), although shesometimes supplements the inventory with stickers and craftsupplies from her own pocket or items donated by parents. Currentlyno records are kept.

Although very popular with the students, Miss Peach finds thecurrent system way too chaotic. Her main goal is to use thecomputer to make it possible for the students to run the storethemselves. Shifting the responsibility for running the store toher students would make it into a learning experience for them. Italso would make it possible to open the store anytime a student isfinished with his or her regular activities.

General supplies include pencils, pens, crayons, markers, chalk,white paper, lined paper, notebooks, colored paper, tissue paper,construction paper, rulers, scissors, glue sticks, tape, brassfasteners, envelopes, paint, pipe cleaners, glue, and popsiclesticks.

Donated supplies include books, arts and craft materials (leftover cloth and yarn, toilet paper rolls, bottle caps), and sciencematerials (plastic yogurt containers, seeds, potting soil).

Miss Peach has included a copy of the paper receipt currentlybeing used in the school store to be used as a model.

4^th Grade StoreKelly Elementary School 5150Riverside Drive Marshall, MI 49068

Customer: ID Date:

Receipt

Qty	ID	Description	Each	Total




















		Subtotal
		Tax (6%)
		Debit Total

Signature:

Bank

Currently Miss Peach acts as the bank. All transactions are inpaper money and the only records are related to the normal gradingactivities of homework and behavior. She would like the new systemto allow students to have access to their bank accounts through anATM machine.

Through the ATM the students should be able to change theirpasswords, check their current balances, transfer funds between thechecking and savings accounts, and see or print listings of alltransactions for a period of time. Money in the savings accountshould accrue interest.

Miss Peach has included a copy of her bank checking and savingsaccount transaction histories to be used as a model.

Teachers Credit Union

Checking Account History

periwinklewalrus620

Identify two categories of revenue for Panera Bread from the table in the article Revenue Recognition: Key differences between U.S. GAAP and IFRSs. Compare and contrast the companyâs current U.S. GAAP revenue recognition with the potential adoption of IFRS. Provide the IASB Framework or the IAS statement, the changes in revenue recognition as well as potential challenges the company may face in adoption.

Table:

Subject	U.S. GAAP	IFRSs
Concept/objective	realized or realizable and earned.	According to paragraph 83 of the IASB's Framework for the Preparation and Presentation of Financial Statements, revenue is recognized when (1) "it is probable that any future economic benefit" will flow to the entity and (2) such a benefit can be measured reliably. Further, paragraph 93 of the IASB Framework indicates that revenue normally must be earned before it can be recognized.
Definition of revenue	Paragraph 78 of FASB Concepts Statement No. 6, Elements of Financial Statements, defines revenue as "inflows or other enhancements of assets of an entity or settlements of its liabilities (or a combination of both) from delivering or producing goods, rendering services, or other activities that constitute the entity's ongoing major or central operations."	Paragraph 74 of the IASB Framework states, "The definition of income encompasses both revenue and gains. Revenue arises in the course of the ordinary activities of an entity and is referred to by a variety of different names including sales, fees, interest, dividends, royalties and rent." Paragraph 7 of IAS 18 defines revenue as "the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity participants."
Sale of goods or products	SAB Topic 13 indicates that revenue from the sale of goods or products should not be recognized until it is earned and realized, or realizable. Revenue is generally earned and realized, or realizable, when all of the following conditions have been satisfied: There is persuasive evidence of an arrangement. Delivery has occurred (e.g., an exchange has taken place). The sales price is fixed or determinable. Collectibility is reasonably assured. In addition, ASC 605-15 provides guidance on product transactions that include a right of return. Further, various industry- and transaction-specific guidance is provided in other U.S. GAAP.	Under paragraph 14 of IAS 18, revenue from the sale of goods is recognized if all of the following conditions are met: The "entity has transferred to the buyer the significant risks and rewards of ownership of the goods." The "entity retains neither continuing managerial involvement to the degree usually associated with ownership nor effective control over the goods sold." The "amount of revenue can be measured reliably." "[I]t is probable that the economic benefits associated with the transaction will flow to the entity." The "costs incurred or to be incurred in respect of the transaction can be measured reliably."
Rendering services	>Like revenue from product sales, revenue from service transactions should not be recognized until it is earned and realized, or realizable. Revenue is generally earned and realized, or realizable, when all of the following conditions have been satisfied: There is persuasive evidence of an arrangement. Service has been rendered. The sales price is fixed or determinable. Collectibility is reasonably assured. Other than the limited guidance in >ASC 605-20, no specific guidance on the rendering of services exists under U.S. GAAP. The appropriate method for recognizing revenue in such transactions depends on the individual transaction but is usually based on the proportional performance as of the balance sheet date.	Paragraph 20 of IAS 18 states, "When the outcome of a transaction involving the rendering of services can be estimated reliably, revenue associated with the transaction shall be recognised by reference to the stage [i.e., percentage] of completion of the transaction at the balance sheet date." Paragraph 20 goes on to list specific conditions for determining whether an outcome of a transaction can be estimated reliably. And subsequent paragraphs provide guidance on determining the stage of completion. Paragraph 26 of IAS 18 states, "When the outcome of the transaction involving the rendering of services cannot be estimated reliably, revenue shall be recognised only to the extent of the expenses recognised that are recoverable."
Software arrangements	ASC 985-605 provides guidance on recognizing revenue in a software arrangement.	There is no specific guidance on software revenue recognition in IFRSs. An entity should apply the provisions of IAS 18 as appropriate.
Construction-type contracts	ASC 605-35 provides guidance on construction-type contracts. ASC 605-35-25-90 indicates that when the percentage-of-completion method is deemed inappropriate (e.g., when dependable estimates cause the outcome to be doubtful), the completed-contract method is preferable. ASC 605-35-25-25 through 25-27, the customer must approve the scope and price of change orders before the related revenue can be recognized.	IAS 11, Construction Contracts, provides guidance on construction-type contracts. Paragraph 32 of IAS 11 indicates that when the percentage-of-completion method is deemed inappropriate (e.g., when the outcome of the contract cannot be estimated reliably), revenue is recognized to the extent that costs have been incurred, provided that the costs are recoverable. Use of the completed-contract method is prohibited under IFRSs. Paragraph 13 of IAS 11 specifies that when it is probable that the customer will approve the scope and price of a change order, the related revenue can be recognized.
Milestone method	ASC 605-28 provides guidance on the application of the milestone method for recognizing revenue in research or development arrangements.	There is no specific guidance in IFRSs on the application of the milestone method for recognizing revenue in research or development arrangements.
Multiple-element arrangements	ASC 605-25 provides guidance on multiple-element revenue arrangements and establishes detailed criteria for determining whether each element may be separately considered for recognition. This guidance does not apply to arrangements or deliverables that are within the scope of other authoritative literature (e.g., ASC 985-605).	Paragraph 13 of IAS 18 indicates that the recognition criteria under IAS 18 are usually applied separately to each transaction unless either of the following conditions applies: "[I]t is necessary to apply the recognition criteria to the separately identifiable components of a single transaction in order to reflect the substance of the transaction." Two or more transactions "are linked in such a way that the commercial effect cannot be understood without reference to the series of transactions as a whole."
Bill-and-hold arrangements	The SEC staff lists specific criteria that must be met for revenue to be recognized in bill-and-hold arrangements before delivery of the product. (Non-SEC entities also use these revenue recognition criteria because no other authoritative guidance in U.S. GAAP addresses the accounting for these transactions.) The criteria restrict revenue recognition to limited circumstances.	Illustrative Examples to IAS 18 list criteria for recognizing revenue under bill-and-hold arrangements before delivery of the product. While the objective for recognizing revenue in bill-and-hold arrangements may be similar to that in U.S. GAAP, the criteria are not the same.
Gross versus net	ASC 605-45 provides guidance on whether to report revenue on the basis of the gross amount billed to the customer (as a principal) or the net amount retained by the company (as an agent).	Paragraph 8 of IAS 18 requires that revenue be reported on a net basis in agency relationships but does not provide specific guidance to consider. Improvements to IFRSs issued in April 2009) provides examples that indicate whether an entity is acting as a principal or as an agent.
Customer loyalty programs	Revenue recognition for customer loyalty programs is not specifically addressed in U.S. GAAP. (The EITF attempted to address this issue but did not reach a consensus.) Although entities account for customer loyalty programs in different ways, such programs are typically accounted for under ASC 605-25 as multiple-element arrangements or under an incremental-cost model.	IFRIC 13 indicates that customer loyalty programs are deemed multiple-element revenue transactions and that the fair value of the consideration received should be allocated between the components of the arrangement.
Rebates, discounts, incentives, and other consideration	ASC 605-50 indicates that consideration given by an entity to its customers is presumed to be a reduction of revenue unless an identifiable benefit whose fair value can be reasonably estimated is received.	Paragraph 10 of IAS 18 states that revenue "is measured at the fair value of the consideration received or receivable taking into account the amount of any trade discounts and volume rebates allowed by the entity." There is no specific guidance on other types of consideration given by an entity to its customers.
Specific industry and other guidance	Certain standards in U.S. GAAP provide specialized guidance on revenue recognition, including guidance that applies to specific industries and transactions.	IFRSs provide no (or limited) revenue recognition guidance that applies to specific industries or transactions.

greyhornet170

TAX 9873 Lecture Notes - Lecture 33: Tax Deduction, Employee Retirement Income Security Act, Unrelated Business Income Tax

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