You are the new accountant for Evanoff Ltd. (EL). You have been asked to explain the impact of income tax on the financial statements for the year ended 31 December 20X5. You discover the following:
• EL’s product development expenses of $2 million have been deferred, to be amortized over the anticipated product life of four years starting two years from now.
• EL had depreciation expense of $780,000 in 20X5 but claimed no CCA. In the past, CCA charges have been significantly higher than depreciation, resulting in a $460,000 deferred income tax liability on the statement of financial position.
• In 20X5, EL had a loss for tax purposes of $3 million. The company’s tax rate is 40%, unchanged since incorporation 10 years ago.
• In the past several years, accounting and taxable income have been steady but unimpressive in the range of $250,000 to $450,000. EL is aware that management has to make significant strategic changes to combat disastrous operating results this year. In particular, EL is faced with the need to upgrade capital assets to remain competitive. However, raising money for this venture will be very difficult.

Required:
Explain the income tax impacts of the above and describe how results would be reported on the company’s financial statements.