Professional Documents
Culture Documents
Overview
- IAS 12 implements a so-called 'comprehensive balance sheet method' of accounting for income taxes which recognizes both the
current tax consequences of transactions and events and the future tax consequences of the future recovery or settlement of the
carrying amount of an entity's assets and liabilities.
- Differences between the carrying amount and tax base of assets and liabilities, and carried forward tax losses and credits, are
recognized, with limited exceptions, as deferred tax liabilities or deferred tax assets, with the latter also being subject to a 'probable
profits' test.
Objective of IAS 12
- The objective of IAS 12 is to prescribe the accounting treatment for income taxes.
- Deferred tax assets for deductible temporary differences arising from investments in subsidiaries, associates, branches and joint
ventures should be recognized to the extent that it is probable that the temporary difference will reverse in the foreseeable future
and that taxable profit will be available against which the temporary difference will be utilized.
- The carrying amount of deferred tax assets should be reviewed at the end of each reporting period and reduced to the extent that it
is no longer probable that sufficient taxable profit will be available to allow the benefit of part or all of that deferred tax asset to be
utilized. Any such reduction should be subsequently reversed to the extent that it becomes probable that sufficient taxable profit
will be available.
Note: A deferred tax asset should be recognized for an unused tax loss carry forward or unused tax credit if, and only if, it is considered
probable that there will be sufficient future taxable profit against which the loss or credit carry forwards can be utilized.
Presentation
- Current tax assets and current tax liabilities should be offset on the balance sheet only if the entity has the legal right and the
intention to settle on a net basis.
- Deferred tax assets and deferred tax liabilities should be offset on the balance sheet only if the entity has the legal right to settle on
a net basis and they are levied by the same taxing authority on the same entity or different entities that intend to realize the asset
and settle the liability at the same time.
Disclosure
In addition to the disclosures required by IAS 12, some disclosures relating to income taxes are required by IAS 1, as follows:
- IAS 1 requires disclosures on the face of the statement of financial position about current tax assets, current tax liabilities,
deferred tax assets, and deferred tax liabilities.
- IAS 1 requires disclosure of tax expense (tax income) on the face of the statement of comprehensive income.
- IAS 12 requires disclosure of tax expense (tax income) relating to ordinary activities on the face of the statement of
comprehensive income.
- IAS 12 requires that if an entity presents a statement of income, in addition to a statement of comprehensive income, tax
expense (income) from ordinary activities should be presented in the statement of income.
- major components of tax expense (tax income) Examples include:
current tax expense (income)
any adjustments of taxes of prior periods
amount of deferred tax expense (income) relating to the origination and reversal of temporary differences
amount of deferred tax expense (income) relating to changes in tax rates or the imposition of new taxes
amount of the benefit arising from a previously unrecognized tax loss, tax credit or temporary difference of a prior
period
write down, or reversal of a previous write down, of a deferred tax asset
amount of tax expense (income) relating to changes in accounting policies and corrections of errors
- aggregate current and deferred tax relating to items reported directly in equity
- tax relating to each component of other comprehensive income
- explanation of the relationship between tax expense (income) and the tax that would be expected by applying the current tax rate
to accounting profit or loss (this can be presented as a reconciliation of amounts of tax or a reconciliation of the rate of tax)
- changes in tax rates
- amounts and other details of deductible temporary differences, unused tax losses, and unused tax credits
- temporary differences associated with investments in subsidiaries, associates, branches, and joint ventures
- for each type of temporary difference and unused tax loss and credit, the amount of deferred tax assets or liabilities recognised
in the statement of financial position and the amount of deferred tax income or expense recognised in the income statement
- tax relating to discontinued operations
- tax consequences of dividends declared after the end of the reporting period
- Other required disclosures:
details of deferred tax assets
tax consequences of future dividend payments