Recording tax benefit due to loss carryback for CCPC

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nirvana_1959
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Recording tax benefit due to loss carryback for CCPC

Post by nirvana_1959 »

Hello,

Let's say I have an operating loss of $1000 in 2017 that I can carry back to 2016 (which has operating income in excess of $1000 with tax rate of 15%).

Journal Entry
2017-12-31
DR Tax Receivable (GIFI 1066) $150
CR Income Tax Expense $150

Statement of retained earnings (Form 100):
GIFI Description Amount[/b]
3660 RETAINED EARNINGS (deficit) -- Start $5,000
3680 NET INCOME/LOSS ($1,000)
3740 Other items affecting R/E $150
3849 RETAINED EARNINGS (deficit) -- End $4,150

Form 125:
GIFI Description Amount

9970 Net Income/loss before taxes and extraordinary items (1,000 )
9975 Extraordinary item(s)
9990 Current income taxes (150 )
9995 Future (deferred) income tax provision
9999 Net income/loss after taxes and extraordinary items (850 )

Is this correct ?

Thanks in advance!
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DavidR
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Re: Recording tax benefit due to loss carryback for CCPC

Post by DavidR »

Not correct. Your 3680 figure should match your 9999.
scorpionman
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Re: Recording tax benefit due to loss carryback for CCPC

Post by scorpionman »

I think loss carry back is something claimed on the T2, I don't think there's any reason for it to appear in GIFI financial statements. Similar to amortization of eligible capital property. Usually under Canadian GAAP it stays at the same value while you're claiming it on the T2 as a deduction on Schedule 1.
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DavidR
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Re: Recording tax benefit due to loss carryback for CCPC

Post by DavidR »

scorpionman wrote: 17 Dec 2017 05:57 I think loss carry back is something claimed on the T2, I don't think there's any reason for it to appear in GIFI financial statements. Similar to amortization of eligible capital property. Usually under Canadian GAAP it stays at the same value while you're claiming it on the T2 as a deduction on Schedule 1.
1. Some CCPCs are required to follow GAAP - for example if a lender or arms length investor insists on an Audit or a Review engagement. Others will choose to follow most aspects of GAAP when preparing their financial statements. If the benefit of a loss carry back is Material to the financial statements, then it must be recorded in the financial statements if you want your financial statements to be GAAP compliant.
2. FYI, most "eligible capital property" items do not get amortized under GAAP. Some don't meet the definition of an Asset and are immediately expensed; while others have indefinite lives.
scorpionman
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Re: Recording tax benefit due to loss carryback for CCPC

Post by scorpionman »

"Losses carried back to previous years, will reduce the GRIP. Thus, a GRIP could become negative."
Any thoughts on the implications of this negative balance? Are loss carrybacks against gains going to be processed as a check refund when you file your T2 or you're supposed to somehow take out some dividends tax free?
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