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  • FR - Ias 12

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    Zubair Jalloh
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    This document discusses key concepts relating to deferred tax under IAS 12, including temporary differences that arise when the tax base of an asset or liability differs from its carrying amount. Temporary differences result in deferred tax assets when the tax base is higher than the carrying amount, or deferred tax liabilities when the tax base is lower than the carrying amount. Deferred tax is calculated using tax rates expected to apply in the period when the asset is realized or liability is settled.

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    IAS 12

    Original Title

    FR - IAS 12 (2)

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    This document discusses key concepts relating to deferred tax under IAS 12, including temporary differences that arise when the tax base of an asset or liability differs from its carrying amount. Temporary differences result in deferred tax assets when the tax base is higher than the carrying amount, or deferred tax liabilities when the tax base is lower than the carrying amount. Deferred tax is calculated using tax rates expected to apply in the period when the asset is realized or liability is settled.

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    © All Rights Reserved
    Download as PDF, TXT or read online from Scribd
    Flag for inappropriate content
    6 views1 page

    FR - Ias 12

    Uploaded by

    Zubair Jalloh
    This document discusses key concepts relating to deferred tax under IAS 12, including temporary differences that arise when the tax base of an asset or liability differs from its carrying amount. Temporary differences result in deferred tax assets when the tax base is higher than the carrying amount, or deferred tax liabilities when the tax base is lower than the carrying amount. Deferred tax is calculated using tax rates expected to apply in the period when the asset is realized or liability is settled.

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    © All Rights Reserved
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    Accrued expenses already deducted for Tax

    Loan payable equal to amount originally received


    EGs. CV = Tax base (no temporary difference)
    Non-deductible/disallowable (Accrued) expenses

    Non-taxable accrued income IAS 12


    Use rate expected to apply

    in the period CHANGE IN TAX RATES

    "when the asset is realised or liability settled"

    Start
    Also 'deductible temporary difference'

    Income tax recoverable in future period in respect of; deductible temporary


    Estimated future tax consequences
    difference, c/f of unused tax loss or c/f of unused tax credits
    WHAT of transactions & events
    Recognised to the extent that 'there is convincing evidence that taxable profit will
    be available against which the deductible temporary difference can be utilised' Only an a/c'ing adjustment
    NOTE
    compare for YOU'LL NEVER RECEIVE/PAY A CHEQUE FOR THIS!!!
    SFP bal c/f
    DEFERRED TAX ASSETS

    Tax base higher than CV


    more asset to receive Tax benefit from in future Accounting profit
    EGs.Assets(NCA)
    DIFFERENCE BETWEEN
    CA less than Depreciation Taxable profit
    less Tax benefit received in yr
    WHY Disallowable expenses/deductions
    Recognised in SPL but cash not yet paid
    add back to a/c profit
    Taxable trading income
    It's Allowable deduction when PAID Not recognise for Tax as cash not yet paid EGs. Liability(Provisions)
    ADJUSTMENTS
    THE KEY Non-trading income
    ∴ Tax base(=0) less than CV
    deduct from a/c profit
    DEFERRED TAX Allowable deductions
    Also 'taxable temporary difference'
    IAS 12
    Income tax payable in future period.

    Must be calculated & provided for in full, & never discounted


    Entertainment expenses
    Disallowable expenses
    Tax base less than CV
    less asset to receive Tax benefit from in future Donation to political party
    EGs. Assets(NCA) EGS Assume Tax base = CV
    CA higher than Depreciation DEFERRED TAX LIABILITY Property income
    more Tax benefit received in yr Non-trading income (non-Taxable)
    Profit on disposal
    PERMANENT DIFFERENCE
    compare for
    Only impact tax computation of one period
    amount to SPL
    It has NO DEFERRED TAX consequence
    deferred income approach In SPL, recognise portion yearly
    WHY DIFFERENT? (AP + TP) Expense or income
    For Tax, whole amount deducted in yr of receipt EGs. Liability(Gov't grant)
    allowable or taxable
    ∴ Tax base higher than CV; more Tax benefits received in yr of receipt WHAT
    in different period

    TEMPORARY DIFFERENCE to accounting period


    match expense/income Taxable trading income Interest income accrued (but taxed when cash received)
    to their tax The accruals concept EGs
    Difference between dep'n & capital allowances
    Allowable deductions
    in the same period Provisions recognised (but not yet paid)
    Meet liability/asset definition

    will eventually be WHY RECOGNISED?


    The deferred tax liability/asset
    paid/received

    if deferred tax liability not recognised

    too much dividend paid Profit may be overstated

    distort EPS & P/E ratio Consequences

    mislead shareholders

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