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Financial Accounting 202_S2_2023

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IAS 12 - Income taxes

The book holds content for week 1-3

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Topic title: IAS 12 Income tax Sub-topic title: Deferred tax

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  Deferred tax liability – the amount of income tax payable in future periods in respect of
taxable temporary differences
Competence/Attributes
Deferred tax asset – the amount of income tax that will be recoverable in future periods in
1.      Account for income taxes
respect of:
 
◦        deductible temporary differences;
Learning Outcomes:
◦        carry-forward of unused tax losses; and
2.      Understand the meaning of
◦        the carry forward of unused tax credits
deferred tax
Deferred tax principle
 
An entity must recognise a deferred tax liability or asset whenever recovery of settlement of the
CA of an asset or liability would make future tax payments larger or smaller than there would
be if there were no tax consequences on the recovery or settlement. The greater part of IAS 12
is dedicated to the determination of deferred tax.  IAS 12 follows a balance sheet approach to
deferred taxation (i.e. computing the deferred tax asset or deferred tax liability as the case may
be) with the statement of profit or loss and other comprehensive income effect being
determined as the balancing figure (some exceptions apply). Deferred tax is a ‘creation’ of
Content Prerequisites accounting just like depreciation and provisions and comes from the objectives, concepts and
principles of accounting and is of no concern to the ROR (i.e. in each year of assessment/
-        Introduction to -        IAS1 financial year, the ROR aims to recover the ‘current tax’ as indicated by the taxable income of
the concept of Presentation of a taxpayer).
deferred tax. financial statement
Key terms and definitions- IAS 12.5
Prescribed text: -        Conceptual
framework Tax Base The tax base of an asset or liability is the amount attributed to that asset or
-        Service C. L liability for tax purposes
(Latest) Gripping  
GAAP: Your Guide to Taxable Temporary differences that will result in taxable amounts in determining
International Remark Temporary taxable profit (tax loss) of future periods when the carrying amount of the
Financial Reporting -        Read on the Differences asset or liability is recovered or settled
Standards, meaning of Deductible Temporary differences that will result in amounts that are deductible in
LexisNexis deferred tax Temporary determining taxable profit (tax loss) of future periods when the carrying
Differences amount of the asset or liability is recovered or settled
 
Deferred tax The amounts of income taxes payable in future periods in respect of
liabilities taxable temporary differences

Deferred tax The amounts of income taxes recoverable in future periods in respect of:
assets deductible temporary differences

•         the carryforward of unused tax losses, and

•         the carryforward of unused tax credits

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