Praemium Tax: Analysis of Income Tax Expense and Deferred Tax Assets and Liabilities

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PRAEMIUM TAX
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Table of Contents
Answers Part to Question 1.1:...................................................................................................2
Answer to Question Part 1.2:.....................................................................................................5
References:................................................................................................................................9

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Answers Part to Question 1.1:
The charges on income tax expense based on the profit of the company fetched in that year.
It is calculated based on tax rate, which was there on the reporting date. In the year 2018, the
company has paid $2,735,705 and in the year 2017, the company has paid $3,233,770. The
following information was provided in the 2018 annual report of Praemium from cash flow
statement. The company has paid this tax based on the profit fetched during the previous year.
The income tax expense for the company in the year 2018, $3,488,076 and in the year 2017, the
income tax expense for the company is $1,530,833 (www.praemium.com 2019).
The note can be found in the annual report of 2018 of the company where it is present in the
point (K) in which it is mentioned that the company charge income-tax expense based on the
profit for the year adjusted for any non-assessable or disallowed items. It is calculated using the
tax rates that have been enacted by the reporting date (Halbert 2016). It is similar to the income
tax paid in the cash flow statement which transaction is done in cash. It is also paid based on the
profit fetched by the company in the reporting year. The company has recognized the deferred
tax and deferred liabilities by utilizing the method of balance sheet liability with respect to the
rising differences between the tax basses assets and liabilities and the amount which is carried to
the financial statements and unused tax losses. No deferred tax assets or liabilities are recognized
from the assets and liabilities, which are recognized initially except the business combination.
The business combination does not affect the tax profit or loss statement or the accounting
profit or loss statement. The tax rate on which the deferred tax was calculated based on the rate,
which was present at that point of time. Defrred tax appears in the profit and loss statement of
the company. It also appears on the comprehensive statement of income. It does not appear
where it relates to the item, which relates to the equity. Defrred tax assets can be found out for

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deductible temporary differences and tax losses, which are unused. It is only probable that future
taxable amount will be available to analyze the temporary differences and losses. Deferred tax
assets and liabilities are not analyzed when there is a difference between the carrying amounts
and tax basses of investment in the company por any kind of entity for which the deferred tax
will be calculated. This happened because when the parent entity able to control the timing of the
reversalof the temporary differences and it can be said that the differences will not be reversed in
future. Assets are the property or estate, which is hold by the company and it, has monetary value
associated with it.
On the other hand, liabilities are a debt, which the company owes from someone and needs to
pay to that entity in near future. Both assets and liabilities are the part of accounting equation
where it states that the assets are equal to liabilities plus owner’s capital. After analyzing the
financial statement of this company, it can be analyzed that the company has current assets of
$19,455,640 in the year 2018 and in the year of 2017, the company had total current assets of
$15,677,404. The company’s total current assets are $10,863,346 and $8,492,456 in 2018 and
2017 respectively (www.praemium.com 2019). The total assets of the company for the year of
2018 and 2017 are $30,318,986 and $24,170,060 respectively. In the case of fixed assets, the
straight line method is used for the depreciation purpose where the plant, furniture and
equipment depreciation rate is being taken 10-20% and computer equipment the depreciation rate
is 20-33% and deprecation rate on buildings and leasehold improvements is 15%.
In the case of intangible assets it is calculated the details taken in the consideration for the
calculation customer lists and databases acquired by the company and other intangible assets
namely goodwill are calculated using the fair value (Sacks,. et al 2015). Amortizations of the
non-financial assets are also realized. Goodwill is allocated based on cash generating units,