I have started restating the financial statements. Well hasn’t this task been fun! Can’t you hear my enthusiasm from here?
I was travelling pretty well, until I came across an Income Tax expense which pops up twice in the Comprehensive Income Statement. I have been at this spreadsheet for a few hours now, so it could just be lack of focus or my mind just really isn’t getting it..
Where does this Income Tax Expense go?
- Do I show it on the spreadsheet?
- Do I not show it?
- Is it included with the ‘Other Operating Comprehensive Income’?
- Am I to create another Income Tax Expense area on the spreadsheet just like the one above but under the other operating comprehensive income?
- Do I add it to the above Income Tax Expense calculated just above?
Now I have this random box appearing on my blog which just won’t go away. Maybe, it is time to step away from the computer!
If there is anybody out there that can shed some light on my dire situation, I would love to hear from you.
I’m going outside to see if it is raining…
Nic $$xx
INSITEFUL NIC 
Hi Nic,
Income tax expense got you down? Hopefully I can provide a solution.
You will need the income tax expense in your restated financials otherwise nothing will add up. Place it directly under you operating profit before income tax. The entire amount. Then underneath this amount you will need to calculate the income tax benefit: Tax benefit = Net interest expense × tax rate of the firm.
So you need to identify the interest expense of the firm (it may be called finance costs) and take the interest revenue/income from it. Multiply this by your tax rate to get the income tax benefit. Then subtract this amount from the income tax expense. You will now have a tax figure that eliminates the offset caused by borrowings.
You will then need to have the income tax benefit after your net financial expenses before tax. Here the tax benefit calculated early will need to be positive to offset the negative was placed in the operating area.
You should follow Martin’s layout very closely. Page 18 of chapter 4.
LikeLike
Hi Boden, thanks heaps for your advice! I was finding the Tax Benefit calculations itself okay, I was getting confused because my Consolidated Statement of Comprehensive Income showed an Income Tax Expense item twice and I was unsure how to actually treat this.
I took your advice and followed Martin’s layout on Page 18 very carefully and it helped immensely!
LikeLike