Accrual Statements or Tax Returns?
5.00
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Participants review conflicting objectives of IRS business income tax returns and GAAP accrual statements, focusing on Schedule K and M-1 to highlight analysis pitfalls.
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Certificate
0.5 Credit
Cost
1 hr.
Duration
n/a
Prep Time
1
Quiz
Overview
In this short self-study course, participants review the frequently conflicting objectives of business income tax returns prepared according to Internal Revenue Service guidelines and accrual financial statements prepared according to generally accepted accounting principles. They examine the importance of Schedule K and Schedule M-1 in identifying the differences in taxable income and accrual net income, which highlights the pitfalls in using business income tax returns as the source document for financial and cash flow analysis.
Who Should Take This Course
Analysts and lenders interested in exploring the reasons for different bottom line results reported on business income tax returns and accrual financial statements and the implications for proper ratio and cash flow analysis.
Prerequisites
General familiarity with accounting financial statements, performance ratios, and cash flow statements.
Objectives
By the end of the course, participants will be able to:
- Identify the purpose of business income tax returns and the reasons taxable income may, and usually does, differ from accrual income.
- Identify the usefulness of Schedule K and Schedule M-1 in identifying all sources of taxable business income and business tax deductions and the reasons taxable income differs from accrual income.
- Provide reasons why the use of a borrower's business income tax returns for conducting ratio and cash flow analysis rather than its accrual financial statements may result in highly misleading signals about borrower risk.
Materials(access provided with registration)
- Credit Refresher on Accrual Statements or Tax Returns?
- Online Quick Hit Review Quiz
- Webinar Poll Solutions
- Exercise Solutions
