IAS 12 -

INCOME TAX
Q
X Tax Payable 50
under
← PGL 10
prov Cash 60 PGL
Current tax 8-0
1 prov
Add under prov 10
Dec 16 Dec IT
90
Liab 50 liab
PGL 50 PGL 80 50 →

Tax Payable 50 Tax Payable 80 SOFP

a
F Tax 50
Payable
PGL 5 → over prov PGL
cash 45 Current tax 8-0
prov
less : over (5)
l l p prov
Dec 017 75
ec 016

Liab
PGL 50 50 PGL 80
Tax Payable 50 Tax Payable 80

tlthirchawala

-
Gm r
Jan June

Revenue xx
7 v

b mouth
Euc Expenses Pay
Profit xxx
Q r
12
= INS -

A .co
> All Profit 400,000×301=120,000
less : Dividend PGL 90.000
Sales xxx Income ( 100,000 ) cash 90,000
C. O S-
xxx PGL 30,000
Taxable Profit
"

Gross Profit 300,000 300,000×301=90,000 D.TL 30,000

Add Dividend Income
: 100,000 t,
PBT 400,000 current tax

tax Exp (90,000+30,000)

PAT 280,000 A .CO 5.1
.

Div
Receivables 01000,00 B W -

, , ooo

PEEL 30,000 R E
-

xxx

DTL 30,000 Div Payable xx

Income 200,000×207 . = 40,000

Expense ( 100,000)
100,000 XZOY . = 20,000
Q .

Afc
T
y NP 200,000 × 301 . = 60,000
Add : Warranty 100,000
Sales xxx Prov
C. O S -
xxx 300,000 x 301=90,000 → current tax
"

Gross Profit 300,000

less :
Warranty Prov ( 100,000) PGL 90,000
PBT 200,000 Cash 90,000
lax Exp (90,000-30,000) D. TA 30,000

PAT PGL 30,000

140,000

IAS -3T
.

/ Jj
PGL 100,000
Prov for warranty 100,000
Difference
D.TA 30,000
(
PGL 30,000
 IAS - 20

> Afc Profit =400,000

less grant Income (100,000)
:

Sales xxx Taxable Profit 300,000×307 .

= 90,000 → current tax
C. OS xxx
"

Gross Profit 300,000

Add Grant Income
100,0001713T
:

400,000
lax Exp (90000 )
PAT

Difference I -

Difference data:@ I
Timing
,
Permanent Difference
Temporary Difference
① Dividend Income ① Govt
girls
② Warranty
§
Provision Political Donations
⑤ Inventory Damage LIAS 2) -

Finest Penalties .

④ IAS-38 ( capitalized Dev cost)

Tax Accelerated Depreciation

Issue cost ( loan Notes)
 ,
Inventory ? sold ,

cost = 1000
NRV -
-
700
300 loss

→ In Accounting we Book this loss

immediately now because
of Prudence but tax department allows this next year when
we sell this asset next
yr (Timing difference)

Tax Accelerated Depreciation

Machine
Sf , 3000

l l l l
l 1000
O
deep = 1000
deep 1000 2
deep 3

life =3 yrs

→ So in
Accounting ,
we Book this depreciation over the life of Asset ( means 3
yrs)

→ But sometime tax dept allows

full tax depreciation Now .

Tax Man will allow

full now
Issue Cost
Issue cost = 10, ooo → pay full now

l l l

O l 2 3 y

In
Accounting this Issue cost will be spread ed over the life of loan
→ .

→ But tax dept allows complete Issue cost Now fits a

timing difference) →
Temperorg difference
.

, ,
 Capitalized Dev Cost

→
I 1 Jr
I 1
Amortization Exp .

Asset 50,000
Cash 50,000

→ Tu
Accounting we book this development cost as an Asat Now .
and will
amortize in future .

But tax department allows

Full development cost now .

Again this is
timing difference
.

Types of Temporary difference

Taxable TD
Future Taxable Profit Increases In short to tax in future
Because
of which →
you need pay
.

eg Dividend
.
.

Taxable TDs with Tax rate calculate D.T L

→ are
multiplied to -

PG L xxx

D TL
-
. xxx

Deduct able TD

of which Future Taxable Profit

Because Decreases .

Eg Provision ( warranty )
.

DT A
-
.
.
xxx

Deductable T Ds with tax rate to calculate D. T A PG L Xxx

→
-
are
multiplied .
.
 SOFP Approach
3 columns .

C. V Tax Base Top

Asset T t, Taxable TD
l
''

Asset t, Deductible TD

Liability 9
'
t, Deductible TD
t, T Taxable TD
Liability

Eg # 1 Inventory
1 I

cost = 1000
NRV = 700 C V
-
Tax Base ID

PGL 300 Inventory 700 1000 300×201 .

Inventory 300 = 60 ( D T A)
- -

D- TNA 60

PGL 60

Eg # 2 Warranty Provision
C' V
dials -10,000 Tax Base Top
PGL 10,000 ←
Prov for
-
Warr . 10,000
Warranty 10,000 -
10000×301 .

D T A
- -
3000 Prov
PGL 3000 DTA =
3000 .
 Eg # 3 Dividend .

c. v Tax Base To D
Receivable 10,000
'

Div 10,000 -

10,000 x 301
.

Div Receivable 10,000 Receivable 4 I = 3000 ( D.T L )

.

PGL 10,000

P GL 3000

D T
-

.
L 3000

b) Bowtook purchased an item of Plant for $2000,000 on 1 October 20×0 .

It had an estimated life of eight years and an estimated
residual value of $400, ooo The plant is depreciated
straight line basis The tax authorities do not allow depreciation as a
on a
.
.

deductible expense Instead a tax expense

of 40% of the cost of this type of asset can be claimed against income tax in the year
.

of purchase and 201 per ( reducing balance basis) of its tax base thereafter The rate of income tax can be taken as 251
. annum on a . . .

Required In
:
respect of the above item of plant calculate the deferred tax charge / credit in Bowtook 's statement of profit or loss
,

for the year to 30M September 20×3 and the

deferred tax balance in the statement of financial position at the date
Note : work to the nearest $000 -

Acc deep 10,000

-
- Acc deep =
15,000
l l
3 1st Dec 01T deep Exp = 5000 31st Dec 018
 C. V Tax Base TD

Cost 2000,000 2000,000

HE 306pm ( 200000) @ 401 ( 800,000)
.

1800,000 1200,000
Y/E30SepX2 (200,000) @ 201 (240,000)
.
(Tax TD)
Bal at 30597×2 1600,000 7
960,000 640,000 @ 251=160,000 ( D T L)
- -

Y/E30Sepx3 (200,000) @ 20%492,000)

Bal at 30thSepx3 1400,000 768,000 =

632,000 @ 251 . = 158000
Tax TD (DTL)

Question #2 .

C. V Tax Base
Deff Tax
%D

15000
Cost 500,000 500,000 bfd
HE Dec 08 ( 50000 ) @ 25%1125000) (Tax TD) (D -

T L
-

) 38750 B
-
T p q2
Bal Dec 08 75000 @ 201 15000
450,000 375000 . =

SOFP
HE 31 Dec 09 150,000) @ 25-1193750) Feld 53750

Bal at Dec 09 400,000 118750 Tax TD

281250
Comm 150000 =
150000 Tax TD
Recievable 268750 Net Tax TD
@ 201=53750 (DTL)
PGL 38750
DTL 38750
 C. V Tax Base TD

Cost 600,000 600000

HE Dec08 (3-0000) @2otll2Q00.0faxT.D) (D -

T L
-

)
Bal 31 Dee 08 570,000 480,000 90000 @ 307 . = 27000
Y/EDec09 ( 30000) @ 201 ( 96000)
.

Bal at Deco 9 540,000 384000 = 156000 Tax TD

Accrued trials 10000 1-0000 ( Ded T D -

)
146,000 Tax TD

@ 307 . = 43800 (D T L )
- -

Dr Deff Tax cr
Asset 10,000

bfd 27000 Cash 10,000

SOFP
PGL 16800 Exp
=
yd 43800 →
 C. V Tax Base TD

Cost 800,000 800,000

HE Deco8 1160000)
-
@ 307-1240,000)
-
( D T.LY
-
Deff Tax
Bal Dec 08 640000 560,000 80000 @ 201 . = 16000
HE Decog ( 160000) @ 301-468000 ) (Tax TD)
bfd 16000
Bal at Dee 09 480,000 392,000 88000 flax TD) PGL 3600
Issue cost 10,000 10000 (Tax TD )
(Asset) 98,000 Tax TD Cfd 19600
@ soy .

= 19600 (DTL)
 Deff Tax on Revaluation

( IAS -16 )
PP4E 10,000
Revaluation 10,000
Reserve

Rev Reserve 3000

DT L - 3000

79L 3000

D.T L -
3000

Fair Value
Through OCI
31 Dec 09
C. V

:/ /
=
Tax Base TD

Investment 10,000

}
Warrant Provision 5000 - 5000 ( Dedi D) -

!
" ' "ooo

:%%EhE
Ifrs a
Dr:÷:tun→ets÷%
-

=
a, so .
85,000 (Net Tax TD )
DTL 3000
@ 301 .

25,500 (DT L)
-

Deff Tax
-

PGL 5000
6000
Prov .
5000 told
-

PGL 19500
Asset 50,000
Cash ↳ EXP
-
50,000 yd 25,500

Div Receivable 40,000

P00
 I

31Decx4-C.VTaxBaseToDP.p.E3l012308T0@l5fY 7aycp.tD
31 Dec x3

31 Decay
C. V

:/ :/
Tax Base Top

PHE 460 270 190 ( Tax -1 -

D )

in :*::* . ::*::
Provision 40 - 40 ( Ded T -

D)
Net Tax TD = 220 @ 307 .

= 66 (D -

T -

2)

"PGE 90
Rev Res go Dr . Deff Tax or .

Rev Res 27
DT -
L 27 told 24
Int Receivable to Rev Res 27
Cash 45 PGL 15 B
Tat Income 55
Cfd 66
Asset 60
Cash 60
PGL 40

Provision 40
 1st Jan 09
→
31 Dec 09

Net Tax TD = 300 @ 301=90 (D T - -

)
L

C. V Tax Base Top

Comm Receivable 140 -

140 ( Tax TD)

PPGE 650 340 310 ( Tax TD

)
Provision 60 - 60 ( Ded T D)-

Develop cost 80 -

80 ( Tax TD )
Inventory 50 70 20 (ded TD)
450 l Net Tax To
'
D)
Comm Receivable 140 @ 301 .

PGL 140 =
135 ( D. Trl)
Phl
pr% 60

Asset 80
Dr Deff Tax or
cash 80
Prue 80 bfd 90
Rev Reserve 80
Revokes 24
.

Rev Reserve
,yF!
.

24
PGL 21 B
Gd 135
=
↳ Exp
←
Sopp
 C. V

) 13
Tax Base Top

Dev cost 30,000 -

30,000 (Tax TD)

" °O° "" ""
Feig:{icing
" '
°O° '
"

Issue Cost 15000 - 15000 tax TD)

75,000 ( Tax TD)
@ 307.
= 22500 (D -
T L)
-

Dr
Deff Tax or ppqt 20,000

Rev Reserve
.
20,000

bfd 15000 Rev Reserve

. 6000

Rev Res
.
6000 DT L -
6000

PGL 1500 Asset 15000

old 22500 ↳ Exp cash 15000
 IAS -
12 with Final Accounts

Routine
thing

In Income Statement Book current tax But also deffered tax That Book Total Tax in
we not
only means we
.

, ,

Income statement

Estimated current xxx Dr Deff Tax co

Tax
Liability
Add Under Provision
: xxx → TB → Dr side PGL xxx
b)d XXX
less Over Provision
: (xxx) → TB → credit side
PGL xxx
Hd 6000
Add Deff Tax charge xxx
:

less Deff Tax credits (xxx)

(↳
:

xxx Income statement Net Tax 7. D= 20000×301

>
Non current vials .
 Current Tax 60000 → current
Uab
less over
prov ( 4500)
→ Increase
Add ;DeffTaxExp 600

56100
✓

under prov 5000

} -_

D 30 'hSepxl
C current tax 83000
under Prov 5000
-

88000
=

Total Tax Exp

current tax 15000

prov

over Prov ( 4000)

Deff Tax credit -13000)

✓ 8000
 Total Tax
PPGE 10,000
Current 12000
yr Tax Rev Res 10,000
Over Prov ( 000) Rev Res
- 3000

3000
Add :DeffTaxEtp 4000 DTL

9000