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Csac 3595 Intermediate Financial Accounting 2

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CSAC 3595 Intermediate Financial Accounting 2

Group Research Activity 5

April 16,2019

Group A


Following information could be gathered from reviewing the consolidated statements of net earnings and other comprehensive income for 2014 and 2013:

All amounts are in thousands CDN.

The income tax expense (benefit) for each year:

According to the company’s Statement of Net Earnings for 2014 the income tax expenses and benefits that are related to the loss from operations before discontinued operations was a benefit $74,556 and for 2013 $51,500.  Any losses incurred in operations can be deducted from taxable incomes going back tree years and forward 20 years to recover past taxes and/or carried forward to reduce future taxable incomes. That is why the benefits associated with some of the losses can be qualify as a tax asset and tax benefit in the year when the loss accounted.

Intraperiod tax allocation in 2014 and 2013:

Maple Leaf Foods Inc uses intraperiod tax allocation relating to its discontinued operations in both years. The same concept used  for its other comprehensive income (OCI) items.

In Note 25 disclosed that discontinued operations had impact of income tax expense of $107,123 in 2014 and $127,790 in 2013. Maple Leaf Foods Inc incurred gains on the disposal of the operations they discontinued in each year, and the related tax effect needs to be associated with the underlying transactions that attract the tax. Items in OCI tend to be the result of unrealized gains and losses that will eventually have income tax levied when realized. The tax expense/benefit, however, is associated with the events when recognized for accounting purposes. In 2014, three such items were recognized, resulting in recognizing a net $16,800 related tax benefit in OCI; and in 2013, three items were recognized which had a net income tax expense of $70,600. In each of the three cases in the two years, the tax is reported along with the type of gain or loss reported.

Income taxes payable on the consolidated statements of financial position at the 2014 and 2013 fiscal year ends:

According to the Statement of Financial Position there are income taxes payable of $26,614 but there is  $0 for the previous year 2013. However, there was $43,300 of income and other taxes receivable at December 31, 2013, but no amount for this account at December 31, 2014. This is in comparison with amounts reported on the statement of cash flows of net income taxes received of $1,442 for 2014 and $28,537 for 2013.  It should be noted that the references to income tax adjustments to net earnings in the top portion of the operating cash flows section of the cash flow statement, both current and deferred, were merely to add back/deduct the amounts reported on the statements of net earnings so that the company could report the actual amount of net income taxes paid/received as a separate line item below. Reporting the income taxes paid or received in a year is a disclosure requirement.


In Note 24 in the financial statements for 2014disclosed the income tax benefits. The summary using the statutory tax rates and effective tax rates for 2014 and 2013 are shown in the table below.

(All amounts are in thousands CDN)



Income tax(benefit) at applicable statutory rate



Increase in benefit and rate due to non-taxable capital gains



Increase in benefit due to “other” reasons



Reduction in benefit and rate due to manufacturing and processing credit



Reduction due to share based compensation



Reduction in benefit due to non-deductible expenses



Reduction due to tax rate differences in other countries



Reduction due to non-recognition of tax loss benefits



Reduction in Deferred tax expense relating to changes in tax rates



Total income tax benefit at effective rates



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