$6\mathrm{.}3$ Accounting for tax losses

Assume company Y has been consistently profitable until $2014$ when, as a result of a fall in

revenues and a large restructuring charge, it reported a before$-$tax loss of $100$ in its published

accounts. Below is an overview of the taxable and deductible temporary differences. Taxable

temporary differences are attributable largely to differences in the book and tax treatments of

depreciation and profits on long$-$term contracts. Most of the deductible difference in $2014$ is

attributable to the restructuring charge. There are no permanent differences. The corporate tax

rate is $40\%.$

A$.$ What is the income tax expense company Y will recognize in $2013$ and $2014,$ assuming:

$($a$)$ It can carry tax losses forward but not back.

$($b$)$ It can carry tax losses back $($one year only$)$ as well as carry them forward.

B$.$ How would your answers to A change if Company Y$\text{'}$s taxable income during $2013$

would have been $25?$

C$.$ In each case, determine the deferred tax balances company Y will report in its end$-2013$

and end$-2014$ balance sheets.