Part 1

A member of your Board of Directors is concerned that your company’s income statement reports an income tax expense of $12.3 million, but the income tax obligation to the government for the year is only $7.9 million.

For this discussion activity, respond to the following question: Performing as the Corporate Controller, how might you explain this apparent discrepancy to the board member? Note: This board member has a limited accounting background.

Part 2

Some accountants believe that deferred taxes should be recognized only for some temporary differences. The FASB requirement states that deferred taxes should be recognized for all temporary differences. Who do you agree with and why? Justify your reasoning.

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