Financial Analysis Report: Westin Insurance Company - Tax Implications

This report provides a detailed financial analysis of Westin Insurance Company, addressing key aspects of its tax planning and financial reporting. It begins by identifying and explaining the deferred tax asset related to operating losses, emphasizing its utilization through reversing taxable temporary differences. The report then examines the impact of new legislation on tax benefits, aligning with US GAAP, and discusses how changes in tax laws affect deferred tax liabilities. Furthermore, it outlines tax planning strategies available to Westin, such as equipment expenditures and employee profit-sharing plans, to realize tax benefits from operating loss carryforwards. Finally, the report clarifies the general rule for carrying forward losses, including the options available and the considerations for determining sufficient taxable income over the next 15 years. The report uses references to support its analysis.

Running head: WESTIN INSURANCE COMPANY
Westin Insurance Company
Name of the Student
Name of the University
Authors Note
Course ID

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Table of Contents
Answer to question 1:.................................................................................................................2
Answer to question 2:.................................................................................................................2
Answer to question 3:.................................................................................................................3
Answer to question 4:.................................................................................................................3
Reference List:...........................................................................................................................5

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Answer to question 1:
The deferred tax asset is identified for the loss carried forward from the operating
losses in the balance sheet to the extent that is taxable during the existing temporary
differences for an appropriate type that is reserved for an appropriate type. Reversing those
taxable temporary differences provides the utilisation of the unused amount of tax losses and
justifies the identification of the deferred tax assets (Laux, 2013). On the circumstances when
the it is noticed that the extent to which the unused amount of tax losses can be recovered
against the future taxable profit for every year, the amount of deferred tax assets that is
identified for the operating loss is identified operating loss from the current differences is
limited by the law.
The reason behind this is that appropriate temporary differences reverses the amount
of tax losses that can be used by the reversal as stated by the taxation law. If the unused
amount of tax losses exceeds the sum of appropriate current taxable temporary differences an
additional deferred tax asset should be identified under the paragraph 29 and 39 of the IAS
12. This represents that the entity will be having an appropriate taxable profit till the extent
that the tax planning is available to the entity which will create correct taxable profit.
Answer to question 2:
As stated under the US GAAP, the impact of new legislation is identified on the
reporting of tax benefit and the impact of the change in the tax laws or rates on the deferred
tax liability or the deferred tax asset as the discrete item during the interim period which
includes the enactment date. The impact of changes in the tax that is presently payable or
refundable by the Westin Sun Insurance Company for the current year can be reflected in the
calculations of the yearly effect tax rate. As a result of this, any impact of the tax laws or the
change of rate on taxes that is payable or refundable for the previous year can be identified

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for Westin Sun Insurance in the form discrete item of the tax expenses or benefit for the
present year of income.
Answer to question 3:
Tax planning strategies that are available to the Westin in order to realise the tax benefit
of the operating loss carry forward are as follows;
a. The amount of income tax benefit that is paid or payable for the year is determined by
implement the provision of tax laws to the taxable income or the surplus of the
deductions that are during the revenues for that year.
b. Making equipment expenditure: Westin Sun Insurance Company can consider
purchasing machinery equipment can consider purchasing it before the end of the year
(Tearney, 2015). At the minimum, in respect of the generally applied half year
convention Westin Sun Insurance Company will be able to secure the half-year worth
of the depreciation deductions relating to the first year of ownership.
c. Employee profit sharing plans: An EPSP can be used by the Westin Insurance with
one of the benefits can be postponed as the source of deductions that is payable during
the yearend tax planning. With reduced amount of corporate income tax rate can help
in carrying forward the operating loss.
Answer to question 4:
As a general rule, Westin Sun Insurance at the initial stages should carry the loss back
to the previous three years, then simultaneously bring the loss to the second prior year and
then finally to the first prior year and keep the same forward for 15 years. This will allow the
corporation to carry forward the net operating loss (Laux, 2013). As the matter of practical
fact, Westin Insurance may be forced to reconcile the determination which is the going
concern with the determination that it does not anticipate sufficient total taxable income over

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the period of next 15 years as this will enable Westin Sun Insurance to carry the loss forward.
However, Westin has fifteen years to carry the loss forward and can realize the benefit of
carrying forward given that the Westin Sun Insurance exceeds the cumulative taxable income
for the last three years.

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Reference List:
Laux, R. C. (2013). The association between deferred tax assets and liabilities and future tax
payments. The Accounting Review, 88(4), 1357-1383.
Tearney, M. G. (2015). Discounting deferred tax liabilities–review and analysis. Journal of
business, finance and accounting.