Monday 31 December 2012

Responsible Blogging 2013

What's Responsible Blogging 2013?

It is a campaign calling upon the entire online community in Malaysia to rally for and support an ethical climate in the blogosphere for mutual benefit. 

It is organised by Crowdpot by partnerting with Nietology which is a high reputable ASEAN mobile device technology company, strongly driven by the people’s pride and importance of being on par with global technology progression and renowned international standards. Phenomenal growth is what we strive for and we who have an eye for details, meticulous with elements of technology, art and beauty – ENSURES this. Inspired by bold and fast-paced lifestyles, product of Ninetology are empowered by today’s solutions for practicality and functionality.

There are 9 main pillars for Responsible Blogging

1. Get Rewarded/Paid Ethically
- Bloggers are ought to get rewarded in many ways but have to be in ethical manner. Crowdpot (oganiser of Responsible Blogging 2013) provides the by far the most ethical approach to any sponsored blogpost.

2. Do check the verity of your information
- Blogger and blog are one. What has been blogged would reflect blogger as a person. If data and facts are incorrect, it will tarnish blogger's credibility greatly. No one wants to read a blog with wrong information.

3. Do regard your readers’ opinions
- No matter how strongly we hold onto a certain opinion, remember that there are other people who treasure their opinions like us too. Always blog with an open mind.

4. Do know that blogger are answerable for his/her blog
- Bloggers might get carried away while blogging about an issue or just our thoughts on a certain dish, but should when wrong information (by accident) was givin, just apologize. No harm in saying sorry. Plus, it saves you the time and effort in defensing later.

5. Do be aware of the country’s Copyright Law
- Remember not to copypaste and publish stuff that is not your original idea. The rightful owner can sue for copyright infringement and things can get ugly.

6. Don’t forget to give credits
- Just in case sharing from someone else (because the content is too good to not be shared), remember that we should always give due credit to its rightful owner.

7. Do write a Disclaimer
- Sometimes we might get carried away with our strong opinions about an issue. However if we work for an organization, it is a good idea to include a disclaimer to protect us and the company by stating that your viewpoints do not represent the company and they are solely yours.

8. Be Transparent
- With Sponsored Posts we do not want to be branded as an ambassador for a certain company because every time you talk about that brand, our readers will equate us to it and that loses our credibility.

9. Be flexible and be a friend to all

Interested to join? Click the following banner.

Wednesday 26 December 2012

Simple Explanation on Taxation and Deferred Taxation

Recently, depreciation, capital allowance and deferred taxation have become one of the hottest issues among my investment friends. My friends asked me to blog about it.

Okay, it’s time to utilize my experience of working in audit firm. I think I shall explain what’s that to my investment friend through my blog.

First of all, let me explain what is depreciation.

When a company purchases an asset, such as a machine, it would be recorded as an asset in account and then being depreciated when time passes. There are several method of depreciation such as straight line method, reducing balance and sum of digit. Commonly, straight line method is being used. Straight line method means, the asset will be depreciated equally throughout the useful life. Thus, useful life has to be determined. Useful life will be determined basically base on how long can the equipment being used.

Example: Company XYZ bought twenty computers that cost RM60,000 with estimated useful life of 5 years. By using straight line method, the computer will be depreciated RM 12,000 a year.


Year 1
Year 2
Year 3
Year 4
Revenue
200,000
220,000
250,000
280,000
Cost of sales
100,000
120,000
130,000
135,000
Gross profit
100,000
100,000
120,000
145,000
Marketing expenses
10,000
20,000
25,000
40,000
Depreciation
12,000
12,000
12,000
12,000
Other expenses
13,000
10,000
15,000
17,000
Profit before tax
65,000
58,000
68,000
76,000

After the profit before tax is computed, tax computation is required to compute the taxation.


Year 1
Year 2
Year 3
Year 4
Profit before tax
65,000
58,000
68,000
76,000
Add: non allowable expenses
            - Depreciation
            - Greeting and gift


12,000
2,000


12,000
3,000


12,000
2,000


12,000
3,000
Adjusted income
79,000
73,000
82,000
91,000

In computation of tax, we need to add back all the non-allowable income, such as depreciation to derive to adjusted income. Depreciation is not applicable for deduction for tax. However, there is application of capital allowance for tax. Capital allowance is similar to depreciation. The asset purchased will be deducted portion by portion year after years.

There are two common types of capital allowance, which are initial allowance and annual allowance. Initial allowance are tax deductible for the first year of purchase (20%), while annual allowance is deducted annually until the value is fully claimed. The rate for annual allowance for each type of asset is different.


Year 1
Year 2
Year 3
Year 4
Adjusted income
79,000
73,000
82,000
91,000
Capital allowance
36,000
24,000
-
-
Statutory income
43,000
49,000
82,000
91,000
Tax payable (25%)
10,750
12,250
20,500
22,750
* initial allowance and annual allowance for computer are 20% and 40% respectively

Tax payable is tax that needs to be paid for the year by the company.

However, as there is capital allowance method doesn’t fulfill the concept of matching principle by accounting standard. Deferred tax exists to reconcile the taxation part.


Year 1
Year 2
Year 3
Year 4
Year 5
Net book value
48,000
36,000
24,000
12,000
-
Residual expenditure
24,000
-
-
-
-
Difference
X 25% (tax rate) =
24,000
6,000
36,000
9,000
24,000
6,000
12,000
3,000
-
-
Changes from last year
6,000
3,000
(3,000)
(3,000)
(3,000)
Net book value = Cost of asset – accumulated depreciation
Residual expenditure = Qualified expenditure (value asset that qualified for tax deduction) – accumulated capital allowance

The difference will be the figure appear as balance in statement of financial position (formerly known as balance sheet) while the changes will be appear in income statement.

Thus the final part of income statement and notes to the account will be look like this:-

 Note to the account (to see the real report, you may refer page 77 of Power Root Berhad’s 2012 annual report)


Year 1
Year 2
Year 3
Year 4
Major components of income tax expense :
Current tax expense
Deferred tax (income)/expenses
-          Origination and reversal of temporary difference

10,750

6,000

12,250

3,000

20,500

(3,000)

22,750

(3,000)

16,750
15,250
17,500
19,750


Year 1
Year 2
Year 3
Year 4
Reconciliation of effective tax expense
Profit before tax
Income tax using Malaysian tax rate
Non-deductible expenses


65,000
16,250

500


58,000
14,500

750


68,000
17,000

500


76,000
19,000

750

16,750
15,250
17,500
19,750

Income statement:


Year 1
Year 2
Year 3
Year 4
Profit before tax
65,000
58,000
68,000
76,000
Taxation
16,750
15,250
17,500
19,750
Profit after tax
48,250
42,750
50,500
56,250