I'm building an integrated financial statement. I've got two years worth of historic data & I'm supposed to project for the next three years. Unfortunately, some parts of the information provided in the historical data set is purposefully wrong and I need to restate these figures before proceeding with my forecasts. One of them..
Year 1 - EBIT (-1500) & EBT (-3000) are negative. Year 2 - EBIT (3000) & EBT (1000) are positive. Balance Sheet (Liability --> Tax - 100), CFS (Tax --> 200)
Note - The question does not provide the corporate tax rate nor the country of operations for the company.
Due to year 1 loss, there will be a tax loss carry-forward (i.e. DTA). However, in year 2, the Cash Flow Statement shows that tax expense has been paid on year 2 EBT and a 'Tax' liability created in the balance sheet.
Why the tax was paid in year 2 as nol from year 1 is greater than net income in year 2. This would mean no tax needs to be paid in year 2.
I'm unable to figure out how this deferred tax liability has been created in year 2 BS, and
Hence, how do I account for the tax loss carryforward from year 1, when tax has been paid and recorded in year 2 financial statements?
