Definition of Deferred Income Tax Expense

Deferred Income Tax Expense

That portion of the total income tax provision that is the result
of current-period originations and reversals of temporary differences.

Accrued expenses payable

expenses that have to be recorded in order for the financial statements to be accurate. Accrued expenses usually do not involve the receipt of an invoice from the company providing the goods or services.

accrued expenses payable

The account that records the short-term, noninterest-
bearing liabilities of a business that accumulate over time, such
as vacation pay owed to employees. This liability is different than
accounts payable, which is the liability account for bills that have been
received by a business from purchases on credit.

Accrued Income

income that has been earned but not yet received. For instance, if you have a non-registered Guaranteed Investment Certificate (GIC), Mutual Fund or Segregated Equity Fund, growth accrues annually or semi-annually and is taxable annually even though the gain is only paid at maturity of your investment.

Accumulated Other Comprehensive Income

Cumulative gains or losses reported in shareholders'
equity that arise from changes in the fair value of available-for-sale securities, from the
effects of changes in foreign-currency exchange rates on consolidated foreign-currency financial
statements, certain gains and losses on financial derivatives, and from adjustments for underfunded
pension plans.

Adjusted Income from Continuing

Operations Reported income from continuing operations
adjusted to remove nonrecurring items.

After-tax profit margin

The ratio of net income to net sales.

After-tax real rate of return

Money after-tax rate of return minus the inflation rate.

Annual fund operating expenses

For investment companies, the management fee and "other expenses,"
including the expenses for maintaining shareholder records, providing shareholders with financial statements,
and providing custodial and accounting services. For 12b-1 funds, selling and marketing costs are included.

Asymmetric taxes

A situation wherein participants in a transaction have different net tax rates.

Average tax rate

taxes as a fraction of income; total taxes divided by total taxable income.

average tax rate

Total taxes owed divided by total income.

Before-tax profit margin

The ratio of net income before taxes to net sales.

Book Income

Pretax income reported on the income statement.

Break-even tax rate

The tax rate at which a party to a prospective transaction is indifferent between entering
into and not entering into the transaction.

Cash flow after interest and taxes

Net income plus depreciation.

Cash Flow–to–Income Ratio (CFI)

Adjusted cash flow provided by continuing operations
divided by adjusted income from continuing operations.

common-size income statement

income statement that presents items as a percentage of revenues.

Contingent deferred sales charge (CDSC)

The formal name for the load of a back-end load fund.

Corporate tax view

The argument that double (corporate and individual) taxation of equity returns makes
debt a cheaper financing method.

Corporate taxable equivalent

Rate of return required on a par bond to produce the same after-tax yield to
maturity that the premium or discount bond quoted would.

Current Income Tax Expense

That portion of the total income tax provision that is based on
taxable income.

Current Tax Payment Act of 1943

A federal Act requiring employers to withhold income taxes from employee pay.

Deferred-annuities

tax-advantaged life insurance product. deferred annuities offer deferral of taxes with the
option of withdrawing one's funds in the form of life annuity.

Deferred Annuity

An annuity providing for income payments to commence at a specified future time.

Deferred call

A provision that prohibits the company from calling the bond before a certain date. During this
period the bond is said to be call protected.

deferred compensation

pay related to current performance
that will be received at a later time, typically after retirement

Deferred equity

A common term for convertible bonds because of their equity component and the
expectation that the bond will ultimately be converted into shares of common stock.

Deferred futures

The most distant months of a futures contract. A bond that sells at a discount and does not
pay interest for an initial period, typically from three to seven years. Compare step-up bond and payment-inkind
bond.

Deferred nominal life annuity

A monthly fixed-dollar payment beginning at retirement age. It is nominal
because the payment is fixed in dollar amount at any particular time, up to and including retirement.

Deferred Tax Asset

Future tax benefit that results from (1) the origination of a temporary difference
that causes pretax book income to be less than taxable income or (2) a loss, credit, or other
carryforward. Future tax benefits are realized on the reversal of deductible temporary differences
or the offsetting of a loss carryforward against taxable income or a tax-credit carryforward against
the current tax provision.

Deferred Tax Liability

Future tax obligation that results from the origination of a temporary
difference that causes pretax book income to exceed taxable income.

Deferred taxes

A non-cash expense that provides a source of free cash flow. Amount allocated during the
period to cover tax liabilities that have not yet been paid.

Depreciation expense

An expense account that represents the portion of the cost of an asset that is being charged to expense during the current period.

Depreciation tax shield

The value of the tax write-off on depreciation of plant and equipment.

depreciation tax shield

Reduction in taxes attributable to the depreciation allowance.

Disposable Income

income less income tax.

Dividend income

income that a company receives in the form of dividends on stock in other companies that it holds.

Double-tax agreement

Agreement between two countries that taxes paid abroad can be offset against
domestic taxes levied on foreign dividends.

earned income

Earned income is generally an individual's salary or wages from employment. It also includes some taxable benefits. Earned income also includes business income if the individual is self-employed. Earned income is used as the basis for calculating RRSP maximum contribution limits.

earnings before interest and income tax (EBIT)

A measure of profit that
equals sales revenue for the period minus cost-of-goods-sold expense
and all operating expenses—but before deducting interest and income
tax expenses. It is a measure of the operating profit of a business before
considering the cost of its debt capital and income tax.

Earnings before interest and taxes (EBIT)

A financial measure defined as revenues less cost of goods sold
and selling, general, and administrative expenses. In other words, operating and non-operating profit before
the deduction of interest and income taxes.

Earnings before interest and taxes (EBIT)

The operating profit before deducting interest and tax.

Earnings before interest, taxes, depreciation and amortization (EBITDA)

The operating profit before deducting interest, tax, depreciation and amortization.

Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA)

An earningsbased measure that, for many, serves as a surrogate for cash flow. Actually consists of working
capital provided by operations before interest and taxes.

EBDDT - Earnings before depreciation and deferred taxes

This measure is used principally by
firms in the real estate industry, with the exception of real estate investment trusts, which typically
do not pay taxes.

Economic income

Cash flow plus change in present value.

Effective Tax Rate

The total tax provision divided by pretax book income from continuing
operations.

Electronic Federal Tax Payment Systems (EFTPS)

An electronic funds transfer system used by businesses to remit taxes to the government.

Employee Retirement Income Security Act of 1974 (ERISA)

A federal Act that sets minimum operational and funding standards for employee benefit
plans.

Equivalent taxable yield

The yield that must be offered on a taxable bond issue to give the same after-tax
yield as a tax-exempt issue.

Expense

The reduction in value of an asset as it is used for current company operations.

Expense ratio

The percentage of the assets that were spent to run a mutual fund (as of the last annual
statement). This includes expenses such as management and advisory fees, overhead costs and 12b-1
(distribution and advertising ) fees. The expense ratio does not include brokerage costs for trading the
portfolio, although these are reported as a percentage of assets to the SEC by the funds in a Statement of
Additional Information (SAI). the SAI is available to shareholders on request. Neither the expense ratio or the
SAI includes the transaction costs of spreads, normally incurred in unlisted securities and foreign stocks.
These two costs can add significantly to the reported expenses of a fund. The expense ratio is often termed an
Operating expense Ratio (OER).

Expensed

Charged to an expense account, fully reducing reported profit of that year, as is appropriate for
expenditures for items with useful lives under one year.

Expenses

The costs incurred in buying, making or producing goods and services.

Expenses

Costs involved in running the company.

Federal Unemployment Tax Act (FUTA)

A federal Act requiring employers to pay a tax on the wages paid to their employees, which is then used to create a
pool of funds to be used for unemployment benefits.

Fixed Expenses

Cost of doing business which does not change with the volume of business. Examples might be rent for business premises, insurance payments, heat and light.

fixed expenses (costs)

expenses or costs that remain the same in amount,
or fixed, over the short run and do not vary with changes in sales volume
or sales revenue or other measures of business activity. Over the
longer run, however, these costs increase or decrease as the business
grows or declines. Fixed operating costs provide capacity to carry on
operations and make sales. Fixed manufacturing overhead costs provide
production capacity. Fixed expenses are a key pivot point for the analysis
of profit behavior, especially for determining the breakeven point and for
analyzing strategies to improve profit performance.

Fixed-income equivalent

Also called a busted convertible, a convertible security that is trading like a straight
security because the optioned common stock is trading low.

Fixed-income instruments

Assets that pay a fixed-dollar amount, such as bonds and preferred stock.

Fixed-income market

The market for trading bonds and preferred stock.

Fixed-income security

A security that pays a specified cash flow over a
specific period. Bonds are typical fixed-income securities.

Foreign tax credit

Home country credit against domestic income tax for foreign taxes paid on foreign
derived earnings.

GENERAL-AND-ADMINISTRATIVE EXPENSES

What was spent to run the non-sales and non-manufacturing part of a company, such as office salaries and interest paid on loans.

Imputation tax system

Arrangement by which investors who receive a dividend also receive a tax credit for
corporate taxes that the firm has paid.

Income

Net earnings after all expenses for an accounting period are subtracted from all
revenues recognized during that period.

Income beneficiary

One who receives income from a trust.

Income bond

A bond on which the payment of interest is contingent on sufficient earnings. These bonds are
commonly used during the reorganization of a failed or failing business.

Income from Continuing Operations

After-tax net income before discontinued operations,
extraordinary items, and the cumulative effect of changes in accounting principle.

Income fund

A mutual fund providing for liberal current income from investments.

income funds

Mutual funds that seek regular income. This type of fund invests primarily in government, corporate and other types of bonds, debt securities, and other income producing securities and in certain circumstances can also hold common and preferred shares.

Income Smoothing

A form of earnings management designed to remove peaks and valleys
from a normal earnings series. The practice includes taking steps to reduce and “store” profits
during good years for use during slower years.

Income Splitting

This is a tax planning strategy of arranging for income to be transferred to family members who are in lower tax brackets than the one earning the income, thus reducing taxes. Even though attribution rules limit income splitting, there are still a number of legitimate ways to do so, such as through the use of spousal RRSPs.

INCOME STATEMENT

An accounting statement that summarizes information about a company in the following format:
Net Sales
– Cost of goods sold
--------------------
Gross profit
– Operating expenses
--------------------
Earnings before income tax
– income tax
--------------------
= Net income or (Net loss)
Formally called a “consolidated earnings statement,” it covers a period of time such as a quarter or a year.

Income Statement

One of the basic financial statements; it lists the revenue and expense accounts of the company.
The income Statement is prepared for a given period of time.

income statement

Financial statement that summarizes sales revenue
and expenses for a period and reports one or more profit lines for the
period. It’s one of the three primary financial statements of a business.
The bottom-line profit figure is labeled net income or net earnings by
most businesses. Externally reported income statements disclose less
information than do internal management profit reports—but both are
based on the same profit accounting principles and methods. Keep in
mind that profit is not known until accountants complete the recording
of sales revenue and expenses for the period (as well as determining any
extraordinary gains and losses that should be recorded in the period).
Profit measurement depends on the reliability of a business’s accounting
system and the choices of accounting methods by the business. Caution:
A business may engage in certain manipulations of its accounting methods,
and managers may intervene in the normal course of operations for
the purpose of improving the amount of profit recorded in the period,
which is called earnings management, income smoothing, cooking the
books, and other pejorative terms.

Income statement

A financial report that summarizes a company’s revenue, cost of
goods sold, gross margin, other costs, income, and tax obligations.

income statement

Financial statement that shows the revenues, expenses, and net income of a firm over a period of time.

Income statement (statement of operations)

A statement showing the revenues, expenses, and income (the
difference between revenues and expenses) of a corporation over some period of time.

Income Statements

A financial statement that displays a breakdown of total sales and total expenses.

Income stock

Common stock with a high dividend yield and few profitable investment opportunities.

INCOME TAX

What the business paid to the IRS.

Income tax

A government tax on the income earned by an individual or corporation.

Income Tax Expense

See income tax provision.

Income Tax Provision

The expense deduction from pretax book income reported on the
income statement. It consists of both current income tax expense and deferred income tax
expense. The terms income tax expense and income tax provision are used interchangeably.

Incomes Policy

A policy designed to lower inflation without reducing aggregate demand. Wage/price controls are an example.

Indirect Taxes

taxes paid by consumers when they buy goods and services. A sales tax is an example.

Inflation Tax

The loss in purchasing power due to inflation eroding the real value of financial assets such as cash.

Interest equalization tax

tax on foreign investment by residents of the U.S. which was abolished in 1974.

Interest income

income that a company receives in the form of interest, usually as the result of keeping money in interest-bearing accounts at financial institutions and the lending of money to other companies.

Interest tax shield

The reduction in income taxes that results from the tax-deductibility of interest payments.

interest tax shield

tax savings resulting from deductibility of interest payments.

Investment income

The revenue from a portfolio of invested assets.
Investment management Also called portfolio management and money management, the process of
managing money.

Investment tax credit

Proportion of new capital investment that can be used to reduce a company's tax bill
(abolished in 1986).

Investment Tax Credit

A reduction in taxes offered to firms to induce them to increase investment spending.

Life Income Fund

Commonly known as a LIF, this is one of the options available to locked in Registered Pension Plan (RPP) holders for income payout as opposed to Registered Retirement Savings Plan (RRSP) holders choice of payout through Registered Retirement income Funds (RRIF). A LIF must be converted to a unisex annuity by the time the holder reaches age 80.

Limited-tax general obligation bond

A general obligation bond that is limited as to revenue sources.

management expense ratio (MER)

The total expenses expressed as an annualized percentage of daily average net assets. MER does not include brokerage fees and commissions, which are also payable by the Fund.

Margin Tax Rate

The tax rate applicable to the last unit of income.

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