REVIEWER Updates in Financial Reporting Standards (UFRS)

MODULE 10
“IASB Other Projects”

Set out below is a complete listing of all the active, past and research projects of the International Accounting
Standards Board (IASB), the International Sustainability Standards Board (ISSB) and the IFRS Interpretations Committee.
Major projects of the IASB and ISSB that are expected to result in new or com pletely reissued pronouncements are listed
by their project names.  IASB/ISSB amendment projects, and most IFRIC projects, are listed by the pronouncement to
which they relate.

Disclosure initiative — Subsidiaries that are SMEs

This project is part of the IASB's overall disclosure initiative and aims at developing an IFRS (a reduced disclosure
IFRS) that will permit subsidiaries that are small and medium-sized entities (SMEs) to apply IFRSs but with reduced
disclosure requirements. An exposure draft of a proposed new standard was published 26 July 2021 with comments
requested by 31 January 2022.

Disclosure initiative — Disclosure review

This project is part of the IASB's overall disclosure initiative and considers the way the Board develops disclosures
requirements in IFRSs. An exposure draft containing draft guidance for the Board to use when developing and drafting
disclosure sections and proposed amendments to the disclosure requirements in IAS 19 and IFRS 13 was published on 25
March 2021 with comments requested by 12 January 2022.

Disclosure initiative — Overview

Provides a summary of projects in the IASB's overall disclosure initiative, outlining summary progress on the
implementation and research projects the IASB has decided to consider as part of the broader initiative.

Earnings per share

On hold. Originally a joint IASB-FASB project to converge the requirements for the calculation of earnings per share.
This project is currently on hold pending an IASB staff review to develop a recommended course of action.

Financial instruments — Macro hedge accounting

A project to consider risk management strategies referring to open portfolios (macro hedging) which are not
specifically covered by the IASB’s project on general hedge accounting. A discussion paper was published on 17 April
2014. A second discussion paper is expected in 2019.

Financial instruments — Comprehensive project

 A multi-faceted joint IASB-FASB project to rewrite the requirements for accounting for financial instruments,
consisting of a number of sub-projects.

Government grants
On hold. Originally a project to reconsider the requirements for government grant accounting. This project is
currently on hold pending an IASB staff review to develop a recommended course of action.

IAS 19/IFRIC 14 — Remeasurement at a plan amendment, curtailment or settlement / Availability of a refund of a

surplus from a defined benefit plan
A narrow scope project to clarify (a) the calculation of current service cost and net interest an when entity
remeasures the net defined benefit liability (asset) when a plan amendment, curtailment or settlement occurs; and (b)
whether a trustee's power to augment benefits or to wind up a plan affects the employer's unconditional right to a
refund and thus, in accordance with IFRIC 14, restricts recognition of an asset. An exposure draft was published on 18
June 2015 with comment letter deadline 19 October 2015. Amendments to IAS 19 regarding (a) were issued on 7
February 2018. Amendments regarding (b) are still outstanding.

IAS 21 — Lack of exchangeability

The IFRS Interpretations Committee received a submission about the determination of the exchange rate when
there is a long-term lack of exchangeability as IAS 21 'The Effects of Changes in Foreign Exchange Rates' does not include
explicit requirements on the exchange rate an entity uses when the spot exchange rate is not observable. The IASB took
the matter over and published an exposure draft of proposed amendments on 20 April 2021 with comments requested
by 1 September 2021.

IFRS Interpretations Committee agenda discussions

The IFRS Interpretations Committee does not take all matters referred to it onto its agenda for resolution. This
project page provides a summary of Committee discussions where the issues are not taken onto the Committee agenda.

Management commentary (Wider corporate reporting)

The aim of this project is to review and update the 'Management Commentary Practice Statement' issued in 2010 to
help address the lack of alignment and integration between wider corporate reporting and financial reporting. An
exposure draft of an updated Practice Statement was published on 27 May 2021 with comments requested by 23
November 2021

Primary financial statements

The aim of this project is to develop improvements to the structure and content of the primary financial statements,
with a focus on the statement(s) of financial performance. An exposure draft of a proposed new standard was published
on 17 December 2019. On 17 April 2020, the comment period on the exposure draft was extended until 30 September
2020.

Rate-regulated activities — Comprehensive project

This project is dedicated to a comprehensive review of the IFRS for SMEs, which the IASB issued in 2009 and
amended in 2015. It is aimed at identifying whether and, if so, how the IFRS for SMEs should be updated to take account
of IFRSs and amendments not currently incorporated into the IFRS for SMEs. An exposure draft of a proposed third
edition of the standard was published on 8 September 2022 with comment requested by 7 March 2023.

Supplier finance arrangements

The Board is looking into the claim that the information entities provide about supplier finance arrangements
applying existing IFRS requirements does not meet all investor information needs. An exposure draft of proposed
amendments was published on 26 November 2021 with comment requested by 28 March 2022.

MODULE 12
“Income Taxes- IAS 12: Philippine GAAP”
 The objectives of IAS 12 is inherent in the recognition of an asset or liability that the asset or liability will be
recovered or settled, and this recovery or settlement may give rise to future tax consequences which should be
recognized at the same time as the asset or liability.
An entity should account for the tax consequences of transactions and other events in the same way it accounts for
the transactions or other events themselves.

Benjamin Franklin once wrote, “In this world nothing can be said to be certain, except death and taxes”. Income tax
is something that can hardly be avoided by a profit-making company. You might find filling-in the tax return a
demanding tax because everything must be correct otherwise you are asking for penalties from your tax office.

The main issue of accounting treatment for income tax is how to account for the current and future consequences
of:
1. The future recovery (settlement) of the carrying amount of assets (liabilities) recognized in the entity’s financial
statements. If the future recovery or settlement will make future tax payments larger or smaller than they would
be if such recovery or settlement were to have no tax consequences, then an entity must recognize deferred tax
liability or asset.

2. Transactions and other events of the current period recognized in the entity’s financial statements. IAS 12
requires accounting for current and deferred income tax from certain transaction or event exactly in the same
way as the transaction or event itself.

Understand the differences

Almost in every country the accounting rules differ from tax laws and regulations. These differences are really
significant and accountants must make lots of adjustments to their accounting profit in order to arrive to the basis for
calculation of income tax.
In order to understand the meaning and the rules of IAS 12, we need to understand the meaning and differences
between:
a. accounting profit and taxable profit
b. current income tax and deferred income tax

I- ACCOUNTING VERSUS TAXABLE PROFIT

Accounting profit is profit or loss for a period before deducting tax expense. IAS 12 defines accounting profit as a
before-tax figure in order to be consistent with the definition of a taxable profit.

Taxable profit (tax loss) – is the profit (loss) for a period determined in accordance with the rules established by the
taxation authorities upon which income taxes are payable (recoverable)
II- CURRENT TAX VERSUS DEFERRED TAX
Current income tax is the amount of income tax that actually needed to pay to the tax office.
Deferred income tax is an accounting measure to match the tax effect of transactions with their accounting impact
and thereby produce less distorted results.

CURRENT INCOME TAX

Current tax is the amount of income tax payable or recoverable in respect of the taxable profit (loss) for a period.

Measurement of current tax liabilities (assets) is very straightforward. We need to use the tax rates that have been
enacted or substantively enacted by the end of the reporting period and apply these rates to the taxable profit (loss)

Current income tax expense shall be recognized directly to profit or loss in most cases. However, if the current tax
arises from a transaction or event recognized outside profit or loss, either in other comprehensive income or directly in
equity, then current income tax shall be recognized in the same way.

Deferred tax liabilities result from taxable temporary differences and deferred tax assets result from deductible
temporary differences, unused tax losses and unused tax credits.
We can calculate deferred tax as temporary difference multiplied with the applicable tax rate.

Before you dig deeper in the concept of temporary differences, we need to understand the tax base first.

Tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.

Tax base of an asset is the amount that will be deducted for tax purposes against any taxable economic benefits
that will flow to an entity when it recovers the carrying amount of the asset.

Tax base of a liability is its carrying amount that will be deductible for tax purposes in respect of that liability in
future periods.

If you review all your assets and liabilities calculating their tax bases, there could be some items not recognized in
your balance sheet that still do have a tax base

Temporary differences are differences between the carrying amount of an asset or liability in the statement of
financial position and its tax base.
  When the carrying amount of an asset or a liability is greater than its tax base, then there is a taxable temporary
difference and it gives rise to deferred tax liability.

 When the carrying amount of an asset or a liability is lower than its tax base, there is a deductible temporary
difference and it gives rise to deferred tax asset

Deferred Tax Liability

We need to recognize deferred tax liability for all taxable temporary differences, except for the following situations:
 No deferred tax liability shall be recognized from initial recognition of goodwill.
 No deferred tax liability shall be recognized from initial recognition of asset or liability in a transaction that is not
a business combination and at the time of the transaction it affects neither accounting nor taxable profit or loss.

Common examples of taxable differences giving rise to deferred tax liabilities are the following:
1. Timing differences –arises when the recognition of certain item in the financial statements occurs in a
different time than its recognition in tax return. For example, interest received is taxed deductible only when
cash is received.
2. Business combinations- identifiable assets and liabilities can be revalued upwards to fair value at the
acquisition date, but no adjustment is made for tax purposes. As a result, taxable difference arises.
3. Assets carried at fair value- applies policy of revaluation and some assets are revalued upwards to their fair
value, taxable temporary differences arises.
4. Initial recognition of an asset/liability – initially recognized in the financial statements, part or all of it could
be tax-non-deductible or not taxable. In these case. Deferred tax liability is recognized on the specific
situation.

Deferred tax asset

While we need to recognize deferred tax liability for all taxable differences, in this situation is different.
A deferred tax asset shall be recognized for all deductible temporary differences to the extent that is probable that
taxable profit will be available against which the deductible temporary difference can be utilized.
No deferred tax asset shall be recognized from initial recognition of asset or liability in a transaction that is not a
business combination and at the time of the transaction it affects neither accounting nor taxable profit (loss).

Unused tax losses and tax credits

A deferred tax asset shall be recognized for the unused tax losses carried forward and unused tax credits to the
extent that it is probable that future taxable profit will be available against which the unused tax losses and unused tax
credits can be utilized.

Investments in subsidiaries, branches and associates and interest in joint ventures, except for various kinds of
temporary differences, a number of them can arise at business combinations.