The document provides an overview of accounting for income taxes under IAS 12. It discusses key concepts such as:
1. Current tax is calculated by applying tax laws and rates to the current period's transactions. Current tax is recognized as a tax expense or benefit in profit or loss, except in some specific cases.
2. Deferred tax arises from temporary differences between an asset/liability's tax base and carrying amount. It is calculated in four steps: determining tax bases, identifying temporary differences, measuring deferred tax using applicable rates, and recognizing deferred tax assets/liabilities.
3. Recognition of deferred tax assets from deductible temporary differences is subject to the probability criterion - it must be probable that future taxable
This document provides an overview of accounting for income taxes. It defines key terms like current tax, deferred tax liabilities, and deferred tax assets. It explains how to identify temporary differences between carrying amounts and tax bases to calculate deferred tax amounts. It also discusses limitations on recognizing deferred tax assets and presenting income taxes in financial statements. The objective is to prescribe accounting treatment for income taxes in accordance with IAS 12.
Topic 5 slides accounting for income taxSujan Neupane
The document outlines the learning objectives for a topic on accounting for income tax. The five learning objectives are: 1) Explain differences between accounting and tax treatments, 2) Calculate taxable profit and account for current tax expense, 3) Explain transactions with current and future tax consequences, 4) Account for movements in deferred tax accounts and tax rate changes, and 5) Specify disclosures required by an accounting standard on income taxes. The document repeats these learning objectives over multiple slides.
IAS 12 provides guidance on accounting for deferred taxes. A deferred tax liability arises when tax depreciation is higher than book depreciation, resulting in lower current tax expense. A deferred tax asset occurs when tax depreciation is lower than book depreciation, resulting in higher current tax expense. These differences are temporary and will offset over time. The deferred tax amounts are recorded to allocate the tax expense or benefit to the appropriate accounting periods. Examples show calculating deferred tax liability when tax depreciation exceeds book depreciation, resulting in lower current taxes. Deferred tax amounts are presented separately from other assets/liabilities and not classified as current. Tax rate changes use enacted rates when the deferred amount reverses.
This document provides an overview of IAS 12 Income Taxes. It discusses key definitions such as deferred tax liabilities and assets. It explains the reasons for recognizing deferred tax and the methods of accounting for deferred tax, including examples of temporary differences. The disclosure requirements of IAS 12 are outlined. Worked examples are provided to illustrate the calculation of deferred tax liabilities and the accounting for deferred tax on asset revaluations. Upon reviewing this document, one should be able to apply IAS 12 to determine deferred tax balances and tax expense/income in financial statements.
This document outlines accounting principles for income taxes, including:
1) It defines key terms like current tax, deferred tax liabilities, deductible temporary differences, and prescribes how to account for income tax consequences of transactions and events.
2) A deferred tax liability should be recognized for all taxable temporary differences, unless arising from initial asset recognition not affecting profit. A deferred tax asset can be recognized for deductible temporary differences if future taxable profit is probable.
3) Deductible temporary differences result in deferred tax assets when economic benefits in the form of tax deductions will flow to the entity in future periods against taxable profits. Deferred tax assets are only recognized when future taxable profits are probable
IAS 12 provides guidance on accounting for income taxes. It aims to ensure that entities account for deferred tax liabilities and assets for temporary differences between the carrying amount of assets and liabilities and their tax bases. Key aspects covered include defining temporary differences, recognizing deferred tax assets and liabilities, offsetting current tax assets and liabilities, and presenting current and deferred taxes. Entities must also disclose information related to income taxes in their financial statements.
IAS 12 provides guidance on accounting for income taxes, including how to identify and account for current and deferred taxes. It specifies that income taxes should include all taxes based on taxable profits and excludes taxes not based on income. The standard also defines key terms such as current tax, deferred tax, temporary differences, and tax base which are important for identifying whether items will result in current or deferred tax amounts.
AS 22 - Accounting for taxex on incomeUrmila Bapat
This document provides an overview of Accounting Standard 22 on accounting for taxes on income. It discusses key aspects of the standard such as its applicability, definitions of deferred tax asset and liability, recognition and measurement of deferred taxes, and required disclosures. The standard aims to prescribe the accounting treatment for taxes on income in line with the matching concept and ensures transparency by accounting for the tax effect of timing differences between accounting income and taxable income.
This document provides an overview of accounting for income taxes. It defines key terms like current tax, deferred tax liabilities, and deferred tax assets. It explains how to identify temporary differences between carrying amounts and tax bases to calculate deferred tax amounts. It also discusses limitations on recognizing deferred tax assets and presenting income taxes in financial statements. The objective is to prescribe accounting treatment for income taxes in accordance with IAS 12.
Topic 5 slides accounting for income taxSujan Neupane
The document outlines the learning objectives for a topic on accounting for income tax. The five learning objectives are: 1) Explain differences between accounting and tax treatments, 2) Calculate taxable profit and account for current tax expense, 3) Explain transactions with current and future tax consequences, 4) Account for movements in deferred tax accounts and tax rate changes, and 5) Specify disclosures required by an accounting standard on income taxes. The document repeats these learning objectives over multiple slides.
IAS 12 provides guidance on accounting for deferred taxes. A deferred tax liability arises when tax depreciation is higher than book depreciation, resulting in lower current tax expense. A deferred tax asset occurs when tax depreciation is lower than book depreciation, resulting in higher current tax expense. These differences are temporary and will offset over time. The deferred tax amounts are recorded to allocate the tax expense or benefit to the appropriate accounting periods. Examples show calculating deferred tax liability when tax depreciation exceeds book depreciation, resulting in lower current taxes. Deferred tax amounts are presented separately from other assets/liabilities and not classified as current. Tax rate changes use enacted rates when the deferred amount reverses.
This document provides an overview of IAS 12 Income Taxes. It discusses key definitions such as deferred tax liabilities and assets. It explains the reasons for recognizing deferred tax and the methods of accounting for deferred tax, including examples of temporary differences. The disclosure requirements of IAS 12 are outlined. Worked examples are provided to illustrate the calculation of deferred tax liabilities and the accounting for deferred tax on asset revaluations. Upon reviewing this document, one should be able to apply IAS 12 to determine deferred tax balances and tax expense/income in financial statements.
This document outlines accounting principles for income taxes, including:
1) It defines key terms like current tax, deferred tax liabilities, deductible temporary differences, and prescribes how to account for income tax consequences of transactions and events.
2) A deferred tax liability should be recognized for all taxable temporary differences, unless arising from initial asset recognition not affecting profit. A deferred tax asset can be recognized for deductible temporary differences if future taxable profit is probable.
3) Deductible temporary differences result in deferred tax assets when economic benefits in the form of tax deductions will flow to the entity in future periods against taxable profits. Deferred tax assets are only recognized when future taxable profits are probable
IAS 12 provides guidance on accounting for income taxes. It aims to ensure that entities account for deferred tax liabilities and assets for temporary differences between the carrying amount of assets and liabilities and their tax bases. Key aspects covered include defining temporary differences, recognizing deferred tax assets and liabilities, offsetting current tax assets and liabilities, and presenting current and deferred taxes. Entities must also disclose information related to income taxes in their financial statements.
IAS 12 provides guidance on accounting for income taxes, including how to identify and account for current and deferred taxes. It specifies that income taxes should include all taxes based on taxable profits and excludes taxes not based on income. The standard also defines key terms such as current tax, deferred tax, temporary differences, and tax base which are important for identifying whether items will result in current or deferred tax amounts.
AS 22 - Accounting for taxex on incomeUrmila Bapat
This document provides an overview of Accounting Standard 22 on accounting for taxes on income. It discusses key aspects of the standard such as its applicability, definitions of deferred tax asset and liability, recognition and measurement of deferred taxes, and required disclosures. The standard aims to prescribe the accounting treatment for taxes on income in line with the matching concept and ensures transparency by accounting for the tax effect of timing differences between accounting income and taxable income.
This document provides an overview of International Accounting Standard IAS 12 on income taxes. It defines key terms like accounting profit, taxable profit, current tax and deferred tax. It explains how to recognize current tax liabilities and assets, and the treatment of tax losses carried back. Deferred tax arises from temporary differences between the carrying amount of assets/liabilities and their tax base. These can be taxable or deductible temporary differences. Deferred tax is measured using the balance sheet approach by comparing carrying amounts to tax bases.
As 22 final,AS 22 has become applicable to all listed companies with effect from 01/04/2001. The AS will also be applicable to all non-listed corporates with effect from 01/04/2002 and all other non-corporate entities with effect from 01/04/2003. Hence, now in financial statements two taxes will be accounted for (a) current income tax and (b) deferred income tax. AS 22 is a measurement standard meaning thereby that it involves accounting along with disclosure requirement in financial statements.
1. This document discusses Ind AS 12 which deals with the accounting treatment for income taxes. It replaces Accounting Standard 22.
2. Ind AS 12 requires companies to account for current and deferred tax. Current tax is the amount of tax payable/receivable for the current year. Deferred tax arises due to temporary differences between the carrying amount of assets/liabilities and their tax base.
3. Some key points covered are the definitions of accounting profit, taxable profit, tax expense, current tax and deferred tax. It also discusses recognition, measurement and disclosure requirements relating to income taxes as per Ind AS 12.
IND AS 12 provides guidance on accounting for income taxes based on a balance sheet approach, recognizing deferred tax assets and liabilities for temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets are recognized when it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Current and deferred tax are recognized as income or expense in profit or loss, except for taxes related to transactions in other comprehensive income or equity.
Deferred tax wikipedia, the free encyclopediastep3133
Deferred tax is an accounting concept that recognizes temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. A deferred tax liability is recognized when the carrying amount of an asset is greater than its tax base, and a deferred tax asset is recognized when the carrying amount of a liability is greater than its tax base or when a company has net operating losses. Deferred tax accounting aims to match expenses with related revenues over multiple years in accordance with the matching and temporal principles.
This document provides an overview of accounting for income tax. It discusses calculating taxable profit and current tax expense, accounting for movements in deferred tax accounts, and changes in tax rates. It explains differences between accounting and tax treatments for transactions that can result in temporary or permanent differences. The document also specifies the disclosures required by accounting standards and provides examples of calculating current and deferred tax balances.
- Accounting for income taxes under AASB 112 requires a balance sheet approach, recognizing deferred tax assets and liabilities for temporary differences between an asset or liability's tax base and carrying amount. There is controversy around determining the appropriate tax base, particularly for indefinite life or non-depreciable assets. This impacts whether a deferred tax liability or asset is recognized.
- Upcoming changes in IAS 12 could fundamentally change how Australian entities account for income taxes. This will introduce new rules, procedures, and analysis requirements. The transition will also be challenging.
- There are currently significant practical challenges in preparing and auditing the accounting for income taxes due to the complexity of integrating tax and accounting requirements. This area requires
This document discusses the key differences between IAS 12 and AS 22 regarding accounting for income taxes. IAS 12 uses the temporary difference concept and balance sheet liability method, while AS 22 uses the timing difference concept and deferral method. It outlines the objectives, principles, and methods for computing current tax liabilities, deferred tax assets and liabilities, and the applicable tax rates. Temporary differences arise when the carrying amount of an asset/liability differs from its tax base, and can be either taxable or deductible in nature.
This document provides guidance on calculating deferred tax provisions under IAS 12 Income Taxes. It outlines the basic steps as:
1. Calculate the accounting base of the asset or liability.
2. Calculate the tax base of the asset or liability.
3. Identify and calculate any temporary differences between the accounting and tax bases.
4. Apply the relevant tax rate to any deductible or taxable temporary differences to calculate the deferred tax asset or liability.
5. Calculate the amount of any deferred tax asset that can be recognized based on probable future taxable profits.
6. Determine whether to offset deferred tax assets and liabilities.
The document explains key concepts such as
Withholding tax is a tax that the payer of income deducts from income payments such as employment income, interest, dividends, and other types of income. The payer pays the withheld tax directly to the tax authorities on behalf of the recipient. Withholding tax aims to combat tax evasion. It is typically treated as a prepayment of the recipient's final tax liability but may be refunded or result in additional taxes owed depending on the recipient's actual tax situation. SAP provides classic and extended withholding tax functions to calculate and report withholding tax amounts.
Rodel S. Navarro; Business and Management Consultant and Director; RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS); Tel / Mobile: +63-0917-7333563; Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS; (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com; https://www.slideshare.net/FREEPDFBOOKSPH; freepdfbooksph@gmail.com; www.slideshare.net/IFRS_IAS_COMPILED; ifrs.ias.compiled@gmail.com
Chapter 1 Accounting for Income Tax.pptxSewaleAbate1
This document discusses accounting for income taxes. It explains that temporary differences between accounting income and taxable income create deferred tax assets or liabilities. Temporary differences arise from items that are taxable/deductible in different periods for accounting versus tax purposes. Permanent differences do not create deferred taxes as they only impact the current period. The document provides examples of common temporary and permanent differences that companies must consider when accounting for income taxes.
The document discusses IFRIC 23, which provides guidance on accounting for uncertainties related to income tax treatments under IAS 12. IFRIC 23 clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. It provides guidance on assessing uncertain tax treatments separately or together, examination by tax authorities, and methods for reflecting uncertainty, including using the most likely amount or expected value. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted.
This document discusses tax evasion, tax avoidance, and tax planning in India. It defines each term and explains the differences between them. Tax evasion is illegal and involves failing to report income or improperly claiming deductions. Tax avoidance uses legal loopholes to reduce tax liability but still defeats the intention of tax laws. Tax planning is the recommended approach, as it involves legitimate strategies like maximizing deductions, investments, and year-end planning to minimize tax burden. The document also outlines some common penalties for tax non-compliance in India.
This document discusses tax evasion, tax avoidance, and tax planning in India. It defines each term and explains the differences between them. Tax evasion is illegal and involves failing to report income or improperly claiming deductions. Tax avoidance uses legal loopholes to reduce tax liability but still defeats the intention of tax laws. Tax planning is the recommended approach, as it involves legitimate strategies like deductions, exemptions, and investments to minimize taxes legally according to tax regulations. The document also provides examples of tax planning and outlines various penalties for failure to comply with income tax laws and notices.
This document discusses accounting for taxes on income under Accounting Standard 22. It defines permanent differences and timing differences that cause differences between accounting income and taxable income. Timing differences arise in one period but reverse in subsequent periods, distorting period results. AS 22 requires adoption of deferred tax accounting to account for the tax effects of timing differences. It provides guidelines on recognition, measurement, and disclosure of current and deferred tax assets and liabilities.
The document discusses dual reporting systems in India for financial and tax reporting. There are often differences between the income reported by companies to investors and that reported for tax assessment. Book income is determined under accounting principles and company law, while taxable income is computed under income tax law.
The concept of matching revenues and expenses over the periods they relate to gives rise to differences in profit/loss calculations under company and tax law. This leads to the concept of deferred tax to account for temporary differences between accounting and taxable income. Accounting standards prescribe deferred tax accounting to recognize the tax effect of these temporary differences over time.
This document provides an overview of accounting for income taxes under IAS 12. It discusses the key concepts of current tax and deferred tax. Current tax is the amount of income taxes payable for the current period based on taxable profit. Deferred tax arises from temporary differences between the carrying amount of assets and liabilities in the statement of financial position and their tax bases. The document explains recognition and measurement of current and deferred tax, and provides examples of common temporary differences that give rise to deferred tax assets and liabilities, such as provisions, property, plant and equipment, and fair valuation adjustments.
Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
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Similar to ACCT6004 Module 4_Lecture Notes(1).pptx
This document provides an overview of International Accounting Standard IAS 12 on income taxes. It defines key terms like accounting profit, taxable profit, current tax and deferred tax. It explains how to recognize current tax liabilities and assets, and the treatment of tax losses carried back. Deferred tax arises from temporary differences between the carrying amount of assets/liabilities and their tax base. These can be taxable or deductible temporary differences. Deferred tax is measured using the balance sheet approach by comparing carrying amounts to tax bases.
As 22 final,AS 22 has become applicable to all listed companies with effect from 01/04/2001. The AS will also be applicable to all non-listed corporates with effect from 01/04/2002 and all other non-corporate entities with effect from 01/04/2003. Hence, now in financial statements two taxes will be accounted for (a) current income tax and (b) deferred income tax. AS 22 is a measurement standard meaning thereby that it involves accounting along with disclosure requirement in financial statements.
1. This document discusses Ind AS 12 which deals with the accounting treatment for income taxes. It replaces Accounting Standard 22.
2. Ind AS 12 requires companies to account for current and deferred tax. Current tax is the amount of tax payable/receivable for the current year. Deferred tax arises due to temporary differences between the carrying amount of assets/liabilities and their tax base.
3. Some key points covered are the definitions of accounting profit, taxable profit, tax expense, current tax and deferred tax. It also discusses recognition, measurement and disclosure requirements relating to income taxes as per Ind AS 12.
IND AS 12 provides guidance on accounting for income taxes based on a balance sheet approach, recognizing deferred tax assets and liabilities for temporary differences between the carrying amounts of assets and liabilities and their tax bases. Deferred tax assets are recognized when it is probable that taxable profit will be available against which deductible temporary differences can be utilized. Current and deferred tax are recognized as income or expense in profit or loss, except for taxes related to transactions in other comprehensive income or equity.
Deferred tax wikipedia, the free encyclopediastep3133
Deferred tax is an accounting concept that recognizes temporary differences between the carrying amount of assets and liabilities for financial reporting purposes and their tax bases. A deferred tax liability is recognized when the carrying amount of an asset is greater than its tax base, and a deferred tax asset is recognized when the carrying amount of a liability is greater than its tax base or when a company has net operating losses. Deferred tax accounting aims to match expenses with related revenues over multiple years in accordance with the matching and temporal principles.
This document provides an overview of accounting for income tax. It discusses calculating taxable profit and current tax expense, accounting for movements in deferred tax accounts, and changes in tax rates. It explains differences between accounting and tax treatments for transactions that can result in temporary or permanent differences. The document also specifies the disclosures required by accounting standards and provides examples of calculating current and deferred tax balances.
- Accounting for income taxes under AASB 112 requires a balance sheet approach, recognizing deferred tax assets and liabilities for temporary differences between an asset or liability's tax base and carrying amount. There is controversy around determining the appropriate tax base, particularly for indefinite life or non-depreciable assets. This impacts whether a deferred tax liability or asset is recognized.
- Upcoming changes in IAS 12 could fundamentally change how Australian entities account for income taxes. This will introduce new rules, procedures, and analysis requirements. The transition will also be challenging.
- There are currently significant practical challenges in preparing and auditing the accounting for income taxes due to the complexity of integrating tax and accounting requirements. This area requires
This document discusses the key differences between IAS 12 and AS 22 regarding accounting for income taxes. IAS 12 uses the temporary difference concept and balance sheet liability method, while AS 22 uses the timing difference concept and deferral method. It outlines the objectives, principles, and methods for computing current tax liabilities, deferred tax assets and liabilities, and the applicable tax rates. Temporary differences arise when the carrying amount of an asset/liability differs from its tax base, and can be either taxable or deductible in nature.
This document provides guidance on calculating deferred tax provisions under IAS 12 Income Taxes. It outlines the basic steps as:
1. Calculate the accounting base of the asset or liability.
2. Calculate the tax base of the asset or liability.
3. Identify and calculate any temporary differences between the accounting and tax bases.
4. Apply the relevant tax rate to any deductible or taxable temporary differences to calculate the deferred tax asset or liability.
5. Calculate the amount of any deferred tax asset that can be recognized based on probable future taxable profits.
6. Determine whether to offset deferred tax assets and liabilities.
The document explains key concepts such as
Withholding tax is a tax that the payer of income deducts from income payments such as employment income, interest, dividends, and other types of income. The payer pays the withheld tax directly to the tax authorities on behalf of the recipient. Withholding tax aims to combat tax evasion. It is typically treated as a prepayment of the recipient's final tax liability but may be refunded or result in additional taxes owed depending on the recipient's actual tax situation. SAP provides classic and extended withholding tax functions to calculate and report withholding tax amounts.
Rodel S. Navarro; Business and Management Consultant and Director; RODEL SY NAVARRO BUSINESS CONSULTANCY SERVICES (RSNBCS); Tel / Mobile: +63-0917-7333563; Email: rsnbcs@gmail.com http://www.slideshare.net/RSNBCS; (About Business Laws compilation): http://www.slideshare.net/BUSINESSLAWSPH Email: businesslawsph@gmail.com; https://www.slideshare.net/FREEPDFBOOKSPH; freepdfbooksph@gmail.com; www.slideshare.net/IFRS_IAS_COMPILED; ifrs.ias.compiled@gmail.com
Chapter 1 Accounting for Income Tax.pptxSewaleAbate1
This document discusses accounting for income taxes. It explains that temporary differences between accounting income and taxable income create deferred tax assets or liabilities. Temporary differences arise from items that are taxable/deductible in different periods for accounting versus tax purposes. Permanent differences do not create deferred taxes as they only impact the current period. The document provides examples of common temporary and permanent differences that companies must consider when accounting for income taxes.
The document discusses IFRIC 23, which provides guidance on accounting for uncertainties related to income tax treatments under IAS 12. IFRIC 23 clarifies how to apply the recognition and measurement requirements in IAS 12 when there is uncertainty over income tax treatments. It provides guidance on assessing uncertain tax treatments separately or together, examination by tax authorities, and methods for reflecting uncertainty, including using the most likely amount or expected value. IFRIC 23 is effective for annual periods beginning on or after January 1, 2019, with early adoption permitted.
This document discusses tax evasion, tax avoidance, and tax planning in India. It defines each term and explains the differences between them. Tax evasion is illegal and involves failing to report income or improperly claiming deductions. Tax avoidance uses legal loopholes to reduce tax liability but still defeats the intention of tax laws. Tax planning is the recommended approach, as it involves legitimate strategies like maximizing deductions, investments, and year-end planning to minimize tax burden. The document also outlines some common penalties for tax non-compliance in India.
This document discusses tax evasion, tax avoidance, and tax planning in India. It defines each term and explains the differences between them. Tax evasion is illegal and involves failing to report income or improperly claiming deductions. Tax avoidance uses legal loopholes to reduce tax liability but still defeats the intention of tax laws. Tax planning is the recommended approach, as it involves legitimate strategies like deductions, exemptions, and investments to minimize taxes legally according to tax regulations. The document also provides examples of tax planning and outlines various penalties for failure to comply with income tax laws and notices.
This document discusses accounting for taxes on income under Accounting Standard 22. It defines permanent differences and timing differences that cause differences between accounting income and taxable income. Timing differences arise in one period but reverse in subsequent periods, distorting period results. AS 22 requires adoption of deferred tax accounting to account for the tax effects of timing differences. It provides guidelines on recognition, measurement, and disclosure of current and deferred tax assets and liabilities.
The document discusses dual reporting systems in India for financial and tax reporting. There are often differences between the income reported by companies to investors and that reported for tax assessment. Book income is determined under accounting principles and company law, while taxable income is computed under income tax law.
The concept of matching revenues and expenses over the periods they relate to gives rise to differences in profit/loss calculations under company and tax law. This leads to the concept of deferred tax to account for temporary differences between accounting and taxable income. Accounting standards prescribe deferred tax accounting to recognize the tax effect of these temporary differences over time.
This document provides an overview of accounting for income taxes under IAS 12. It discusses the key concepts of current tax and deferred tax. Current tax is the amount of income taxes payable for the current period based on taxable profit. Deferred tax arises from temporary differences between the carrying amount of assets and liabilities in the statement of financial position and their tax bases. The document explains recognition and measurement of current and deferred tax, and provides examples of common temporary differences that give rise to deferred tax assets and liabilities, such as provisions, property, plant and equipment, and fair valuation adjustments.
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Abhay Bhutada, the Managing Director of Poonawalla Fincorp Limited, is an accomplished leader with over 15 years of experience in commercial and retail lending. A Qualified Chartered Accountant, he has been pivotal in leveraging technology to enhance financial services. Starting his career at Bank of India, he later founded TAB Capital Limited and co-founded Poonawalla Finance Private Limited, emphasizing digital lending. Under his leadership, Poonawalla Fincorp achieved a 'AAA' credit rating, integrating acquisitions and emphasizing corporate governance. Actively involved in industry forums and CSR initiatives, Abhay has been recognized with awards like "Young Entrepreneur of India 2017" and "40 under 40 Most Influential Leader for 2020-21." Personally, he values mindfulness, enjoys gardening, yoga, and sees every day as an opportunity for growth and improvement.
In a tight labour market, job-seekers gain bargaining power and leverage it into greater job quality—at least, that’s the conventional wisdom.
Michael, LMIC Economist, presented findings that reveal a weakened relationship between labour market tightness and job quality indicators following the pandemic. Labour market tightness coincided with growth in real wages for only a portion of workers: those in low-wage jobs requiring little education. Several factors—including labour market composition, worker and employer behaviour, and labour market practices—have contributed to the absence of worker benefits. These will be investigated further in future work.
1. Elemental Economics - Introduction to mining.pdfNeal Brewster
After this first you should: Understand the nature of mining; have an awareness of the industry’s boundaries, corporate structure and size; appreciation the complex motivations and objectives of the industries’ various participants; know how mineral reserves are defined and estimated, and how they evolve over time.
Lecture slide titled Fraud Risk Mitigation, Webinar Lecture Delivered at the Society for West African Internal Audit Practitioners (SWAIAP) on Wednesday, November 8, 2023.
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"Does Foreign Direct Investment Negatively Affect Preservation of Culture in the Global South? Case Studies in Thailand and Cambodia."
Do elements of globalization, such as Foreign Direct Investment (FDI), negatively affect the ability of countries in the Global South to preserve their culture? This research aims to answer this question by employing a cross-sectional comparative case study analysis utilizing methods of difference. Thailand and Cambodia are compared as they are in the same region and have a similar culture. The metric of difference between Thailand and Cambodia is their ability to preserve their culture. This ability is operationalized by their respective attitudes towards FDI; Thailand imposes stringent regulations and limitations on FDI while Cambodia does not hesitate to accept most FDI and imposes fewer limitations. The evidence from this study suggests that FDI from globally influential countries with high gross domestic products (GDPs) (e.g. China, U.S.) challenges the ability of countries with lower GDPs (e.g. Cambodia) to protect their culture. Furthermore, the ability, or lack thereof, of the receiving countries to protect their culture is amplified by the existence and implementation of restrictive FDI policies imposed by their governments.
My study abroad in Bali, Indonesia, inspired this research topic as I noticed how globalization is changing the culture of its people. I learned their language and way of life which helped me understand the beauty and importance of cultural preservation. I believe we could all benefit from learning new perspectives as they could help us ideate solutions to contemporary issues and empathize with others.
2. Elemental Economics - Mineral demand.pdfNeal Brewster
After this second you should be able to: Explain the main determinants of demand for any mineral product, and their relative importance; recognise and explain how demand for any product is likely to change with economic activity; recognise and explain the roles of technology and relative prices in influencing demand; be able to explain the differences between the rates of growth of demand for different products.
Understanding how timely GST payments influence a lender's decision to approve loans, this topic explores the correlation between GST compliance and creditworthiness. It highlights how consistent GST payments can enhance a business's financial credibility, potentially leading to higher chances of loan approval.
Falcon stands out as a top-tier P2P Invoice Discounting platform in India, bridging esteemed blue-chip companies and eager investors. Our goal is to transform the investment landscape in India by establishing a comprehensive destination for borrowers and investors with diverse profiles and needs, all while minimizing risk. What sets Falcon apart is the elimination of intermediaries such as commercial banks and depository institutions, allowing investors to enjoy higher yields.
2. 2
ELECTRONIC WARNING NOTICE FOR COPYRIGHT
STATUTORY LICENCES
Part of lecture notes are modified from CPAAustralia’s materials and resources.
3. 3
OVERVIEW OF MODULE 4
Deferred
tax
Step 1
Tax bases
Step 2
Deductible
temporary
differences
Step 4
Recognise
deferred
tax
Disclosure
Reversal of
deferred
tax assets
Deferred
tax of PPE
Step 3
Measure
deferred
tax
Step 2
Taxable
temporary
differences
Probability recognition criterion
Professional
judgment
Income
taxes
Current
tax
Taxable
profit
Cash
basis
Deferred
tax
Four
steps
4. LEARNING OBJECTIVES
After completing this module, you should be able to:
1. apply the requirements of IAS 12 Income Taxes on income with respect to
current and deferred tax assets and liabilities
2. explain the terms ‘taxable temporary differences’ and ‘deductible temporary
differences’
3. apply the tax rates and tax bases that are consistent with the manner of
recovery or settlement of an asset or liability
4. apply the probability recognition criterion for deductible temporary
differences, unused tax losses and unused tax credits
5. account for the recognition and reversal of deferred tax assets arising from
deductible temporary differences, unused tax losses and unused tax credits
6. determine the deferred tax consequences of revaluing property, plant and
equipment; and
7. apply the requirements of IAS 12 with respect to financial statement
presentation and disclosure requirements.
4
6. INTRODUCTION
Part A examines the fundamentals of accounting for income tax under IAS 12.
The core principle of IAS 12 is that financial statements should recognise the
current and future tax consequences of:
• transactions and other events of the current period that are recognised in an
entity’s financial statements
• the future recovery (settlement) of the carrying amounts of assets (liabilities)
that are recognised in an entity’s statement of financial position
These are reflected in the financial statements as:
• current tax liability
• current tax asset
• deferred tax assets
• deferred tax liabilities
• tax expense (tax income)
6
7. TAX EXPENSE
• Tax expense is the sum of current tax and deferred tax recognised in the profit
or loss for the period (IAS 12, para. 5).
• Tax expense may be negative, in which case it is described as tax income and
has a credit balance.
• Income tax expense (tax benefit) is presented as a separate line item in the
statement of profit or loss and other comprehensive income.
7
8. CALCULATING CURRENT TAX
• Current tax expense (current tax income): ‘the amount of income
taxes payable (recoverable) in respect of the taxable profit (tax
loss) for a period’ (IAS 12, para. 5).
• From a practical perspective, current tax is generally calculated by
either:
• directly applying the relevant tax laws and tax rate to the
transactions and other events of the current reporting period, or
• adjusting the accounting profit of the current reporting period for
differences between accounting and tax treatments to indirectly
determine taxable profit and apply the relevant tax rate.
8
Cash basis
9. RECOGNITION OF CURRENT TAX
• Current tax: usually recognised as an expense (or income, if tax is
recoverable) and included in profit or loss
• Exceptions
• (a) a transaction or event which is recognised, in the same or a different
period, outside profit or loss, either in other comprehensive income or directly
in equity …; or
• (b) a business combination (other than the acquisition by an investment
entity, as defined in IFRS 10 Consolidated Financial Statements, of a
subsidiary that is required to be measured at fair value through profit or loss).
9
Dr Income tax expense
Cr Current tax payable
10. DEFERRED TAX
• Four key steps to calculating deferred tax:
• Step 1: Determine the tax base of assets and liabilities.
• Step 2: Compare the tax base with the carrying amount to determine the
taxable temporary differences and deductible temporary differences.
• Step 3:Measure deferred tax assets and deferred tax liabilities.
• Step 4: Recognise deferred tax assets and deferred tax liabilities, taking
into account the limited recognition exceptions.
10
11. STEP 1: DETERMINING THE TAX BASE OF ASSETS
The tax base of an asset is either:
11
Discuss: Question 4.1
100
90 90 100
The (gross) carrying amount of
the asset, if the carrying amount
is not taxable when it is
recovered (Carrying amount)
The amount deductible against any
taxable economic benefits that will
flow to the entity when it recovers the
carrying amount of the asset.
12. 12
Tax base = Carrying amount + Future deductible amounts - Future taxable amounts
$70 = ($100 - $30) +$70 - $70
Tax base 70 = Carrying amount 70 then TD = 0 no deferred tax effect
CA = 100 – 30 = 70 = TB
13. 13
Tax base = Carrying amount + Future deductible amounts - Future taxable amounts
$60 = $50 +$60 - $50
For tax purpose: CA = 100 – 100/5 x 2 = 60 = FDA
For accounting profit purpose: CA = 100 – 100/4 x 2 = 50 = FTA
TD = TB – CA = 60 -50 = 10; DTA = 10 x .3 = 3
14. STEP 1: DETERMINING THE TAX BASE OF
LIABILITIES
• The tax base of a liability is ‘its carrying amount, less any amount that will
be deductible for tax purposes in respect of that liability in future periods.
14
Discuss: Question 4.2
15. STEP 2: COMPARE THE TAX BASE TO THE
CARRYING AMOUNT TO DETERMINE
TEMPORARY DIFFERENCES
15
DTL
DTA
DTA
DTL
16. STEP 3: MEASURE DEFERRED TAX ASSETS
AND DEFERRED TAX LIABILITIES
• The measurement of deferred tax assets and liabilities must reflect:
• the expected manner of the recovery (settlement) of the underlying asset
(liability) – sell or be held for use
• the tax rates that will apply in the period when the underlying asset (liability) is
realised (settled) (IAS 12, para 51)
• Discounting of deferred tax assets and deferred tax liabilities is not permitted.
16
17. STEP 3: MEASURE DEFERRED TAX ASSETS
AND DEFERRED TAX LIABILITIES
• IAS 12: In some tax jurisdictions, the amount of tax ultimately payable or
recoverable may depend on the manner in which an entity recovers (settles) the
carrying amount of an asset (liability).
17
CA 100 000
TB 60 000
TD 40 000
For use: 40 000 x 30%
For sell: 40 000 x 20%
(is subject to the
capital gain tax)
18. 18
1. CA = 20 000
Tax base = 0
2. CA > TB
3. DTA = 20 000 x .3
= 6 000
19. SUMMARY
Part A discussed how current and future tax consequences are
reflected in the financial statements as:
• current tax liability
• deferred tax assets
• deferred tax liabilities
• tax expense (tax income) for a period.
It also introduced the following terms:
• taxable temporary difference
• deductible temporary difference.
19
21. EXCEPTIONS TO RECOGNITION 1
• A deferred tax liability must be recognised for all taxable temporary
differences (some exclusions).
• Deferred tax liabilities are not required to be recognised when they
arise from:
• ‘the initial recognition of goodwill’, or
• ‘initial recognition of an asset or liability in a transaction that is
not a business combination’ and that ‘affects neither accounting
profit nor taxable profit (tax loss)’ at the time of the transaction
(IAS 12, para. 15).
21
Yes
No
22. EXCEPTIONS TO RECOGNITION 2
Deferred tax assets may arise from:
1. deductible temporary differences
2. unused tax losses and unused tax credits.
Recognition exceptions:
• Deferred tax assets are not recognised when they arise
‘from the initial recognition of an asset or liability in a
transaction that’:
• ‘is not a business combination’
• ‘at the time of the transaction, affects neither accounting
profit nor taxable profit (tax loss)’ (IAS 12, para. 24).
22
23. RECOGNITION OF DEFERRED TAX 1
Application of the probability criterion
• If the amount can be measured reliably, an entity recognises an asset or liability
when it is probable that the asset or liability will be recovered or settled in the
future.
• The probability of the flow of economic benefits to the entity from the reversal of
deductible temporary differences is dependent on the probability of future taxable
profits, against which the related deductible temporary difference can be
deducted (IAS 12, paras 24 and 27).
• Deferred tax assets arising from deductible temporary differences are
recognised only when it is probable that any future economic benefit
associated with the item will flow to the entity.
• Deductible temporary differences reverse when the carrying amounts of assets
or liabilities are recovered or settled and result in deductions in determining
taxable amounts in future periods.
• The benefits of a deferred tax asset are probable of recovery only if it is
probable that the entity will earn sufficient taxable profits against which the
temporary differences can be deducted.
23
24. RECOGNITION OF DEFERRED TAX 2
29 of IAS 12, which explains that when there are insufficient taxable
temporary differences, the deferred tax asset is recognised to the
extent that:
• it is probable that there will be other taxable profit, after allowing
for future taxable profit required in order to utilise future deductible
temporary differences, or
• the entity can create taxable profit by using tax planning
opportunities.
Tax planning opportunities are ‘actions that the entity would take to
create or increase taxable income in a particular period before the
expiry of a tax loss or tax credit carry-forward’ (IAS 12, para. 30).
24
28. 28
20x0 20x1
DTD 60 000
TTD 45 000 55 000
If TTD < DTD, DTA is not recognised
e.g., 45 000 < 60 000 then
DTA = 15 000 x .3 = 4 500 is not
recognised in 2009, only
DTA = 45 000 x .3 = 13 500 is
recognised in 2009,
30. RECOGNITION OF DEFERRED TAX 3
Accounting treatment for tax should be consistent with the
accounting treatment of the transaction or event itself and so:
• recognised as income or an expense and included in profit or loss
(with exceptions), or
• recognised outside of profit or loss:
• in other comprehensive income, or
• directly in equity.
30
31. RECOGNITION RULES FOR UNUSED TAX
LOSSES AND UNUSED TAX CREDITS
• Deferred tax assets also arise when the taxation legislation within a
particular jurisdiction allows an entity to carry forward unused tax losses
and tax credits for use against later years profits. The legislation usually
contains several provisions and exceptions.
• Deferred tax assets arising from unused tax losses and unused tax
credits should be recognised on the same basis as other deferred tax
assets. That is, 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 utilised’ (IAS 12, para. 34).
• Criteria for assessing the probability that taxable profit will be available
against which the unused tax loses or unused tax credits can be utilised.
31
34. RECOVERY OF TAX LOSSES
• The accounting treatment of the recovery of tax losses is dependent
on whether or not the tax losses were recognised as a deferred tax
asset.
• When tax losses are recovered, the benefit from the recovery of those
losses is allocated:
• first to tax losses for which no deferred tax asset was previously
recognised (which, in effect, results in the recognition of an income
tax benefit)
• second to tax losses for which a deferred tax asset was previously
recognised (which, in effect, results in the reduction of the
previously recognised deferred tax asset).
34
Dr Deferred tax expense
Cr Current tax income
Dr Deferred tax expense
Cr Deferred tax asset
35. REASSESSMENT OF THE CARRYING AMOUNTS
OF DEFERRED TAX ASSETS AND LIABILITIES
IAS 12 contains several requirements relating to the reassessment of
the carrying amounts of deferred tax assets and liabilities:
• that an entity will recognise any previously deferred unrecognised
tax asset to the extent it is likely that taxable profit earned in future
will permit recovery of the previously deferred tax asset (IAS 12,
para. 37)
• that the deferred tax asset’s carrying amount should be reduced to
the point where it is no longer likely that a taxable profit sufficient to
allow realisation of the asset will be left (IAS 12, para. 56).
35
Discuss: Question 4.8
36. SUMMARY
Part B discussed the following:
• deferred tax liabilities are recognised for all taxable temporary
differences (with certain limited exceptions)
• deferred tax assets are recognised to the extent that it is probable
that future taxable profit will be available against which the
deferred tax asset can be used (with certain limited exceptions)
• a primary source of taxable profit against which the deferred tax
asset can be used is the taxable amounts that arise when taxable
temporary differences reverse.
36
38. Part C considers:
• temporary differences that arise when assets are carried at
revalued amounts
• temporary differences that arise when the tax base is not adjusted
by an amount equivalent to the revaluation.
INTRODUCTION
39. ASSETS CARRIED AT REVALUED AMOUNTS
• International Financial Reporting Standards (IFRSs) permit a
range of assets to be carried at fair value or revalued amount.
• For example, after the initial recognition as an asset, an item
of property, plant and equipment may be carried at a revalued
amount, being its fair value at the date of revaluation, less
any subsequent accumulated depreciation and subsequent
impairment losses.
• Whether a temporary difference arises when an asset is
revalued, depends on how a revaluation is treated in the tax
jurisdiction.
39
40. ASSETS CARRIED AT REVALUED AMOUNTS
• When an asset is revalued, there are two possibilities:
• the tax base is adjusted by the same amount as the change in the
carrying amount of the asset – no temporary difference
• the tax base is not adjusted, or is adjusted by an amount that differs
from the amount by which the asset was revalued – taxable or
deductible temporary difference.
40
Discuss: Question 4.9
41. RECOGNITION OF DEFERRED TAX ON
REVALUATION
• Deferred tax is recognised as income or expenses except when
the tax relates to items that are credited or charged in other
comprehensive income or directly in equity.
• When the tax relates to items that are recognised in other
comprehensive income, the current and deferred tax is
recognised in other comprehensive income.
• When the current and deferred tax relates to items that are
recognised directly in equity, current and deferred tax is
recognised directly in equity.
41
42. RECOVERY OF REVALUED ASSETS
THROUGH USE OR THROUGH SALE
• The amount of tax payable is affected by the manner of recovery of
an asset.
• An entity may realise the future economic benefits of an asset
either through use or through sale.
• Calculating the tax base is based on how an entity expects, at the
end of the reporting period, to recover or settle the carrying
amounts of its assets and liabilities.
• The tax base may differ in circumstances where different tax
treatments exist for each method.
42
Discuss: Question 4.10
43. ADDITIONAL GUIDANCE ON RECOVERY OF
NON-DEPRECIABLE ASSETS
• ‘recovery’ in relation to an asset that is not depreciated and is
revalued in accordance with IAS 16.
• Tax consequences that should be considered:
• those that would follow from recovery of the carrying amount of
that asset through sale, regardless of the basis of measuring the
carrying amount of that asset.
43
45. SUMMARY
Part C covered:
• Whether a temporary difference arises when the fair value of an
asset is adjusted or an asset is revalued depends on how a
revaluation increase or decrease is treated in the relevant tax
jurisdiction.
• No temporary difference is created when the tax base is adjusted
by the same amount as the carrying amount of the asset.
• A taxable or deductible temporary difference arises when the tax
base is not adjusted or is adjusted by an amount that differs from
the amount by which the asset was revalued.
• The accounting treatment of deferred tax resulting from a
revaluation follows the treatment of the revaluation surplus.
• The manner of recovery of an asset may affect the tax rate and/or
the tax base applicable on recovery or settlement.
45
47. INTRODUCTION
Presentation:
• enable users to understand and evaluate the impact of current and deferred
tax on the financial position and performance of the entity
• focus primarily on the presentation of tax balances in the statement of
financial position
Disclose information about:
• major components of tax expense (tax income)
• relationship between tax expense (tax income) and accounting profit
• particulars of temporary differences that give rise to the recognition of
deferred tax assets and the deferred tax liabilities
• particulars of temporary differences, unused tax losses and unused tax
credits for which no deferred tax asset was recognised (i.e. because the
probability criterion was not satisfied).
47
48. PRESENTATION OF CURRENT TAX AND
DEFERRED TAX
• Current tax assets and liabilities and deferred tax assets and
liabilities are presented in separate line items in the statement of
financial position as required by IAS 1.
• Further, IAS 1 prohibits the classification of deferred tax assets and
deferred tax liabilities as current assets or liabilities.
48
50. OFFSETTING TAX ASSETS AND LIABILITIES
IAS 12 requires that current tax assets (tax recoverable) and current tax
liabilities (tax payable) are offset when the entity:
• ‘has a legally enforceable right to set off the recognised amounts’
• ‘intends either to settle on a net basis, or to realise the asset and
settle the liability simultaneously’ (IAS 12, para. 71).
IAS 12 permits deferred tax assets and deferred tax liabilities to be
offset when:
• ‘the entity has a legally enforceable right to set off current tax
assets against current tax liabilities’
• ‘the deferred tax assets and the deferred tax liabilities relate to
income taxes levied by the same taxation authority’ (IAS 12, para.
74).
50
51. MAJOR COMPONENTS OF TAX EXPENSE
• Tax expense (tax income) is presented as a single line item in the
statement of profit or loss and other comprehensive income as
required by para. 82(d) of IAS 1.
• In order to provide more useful information to the users of financial
statements, para. 79 of IAS 12 requires ‘the major components of
tax expense (tax income) to be disclosed separately’. This
information is usually disclosed in the notes to the financial
statements.
51
53. RELATIONSHIP BETWEEN TAX EXPENSE
(INCOME) AND ACCOUNTING PROFIT
• Profit or loss for the reporting period and tax expense (tax income)
are presented as single line items in the statement of profit or loss
and other comprehensive income.
• In order to fully understand the financial performance of the entity,
IAS 12 requires an explanation of the relationship between tax
expense (income) and accounting profit be provided in the notes to
the financial statements. (Example 4.16)
53
54. INFORMATION ABOUT EACH TYPE OF
TEMPORARY DIFFERENCE
• It is important for the users of the financial statements to
understand
• the nature and amount of each type of temporary difference
• Recognised deferred tax assets and deferred tax liabilities
• Unrecognised deferred tax assets and deferred tax liabilities
54
55. SUMMARY
The objective of the presentation and disclosure requirements of IAS 12 is
to disclose information that enables users of the financial statements to
understand and evaluate the impact of current tax and deferred tax on the
financial position and performance of the entity.
Presentation and disclosure items discussed in Part D included:
• major components of tax expense (tax income)
• relationship between tax expense (tax income) and accounting profit
• particulars of temporary differences that give rise to the recognition of
deferred tax assets and the deferred tax liabilities
• particulars of temporary differences, unused tax losses and unused tax
credits for which no deferred tax asset was recognised (i.e. because the
‘probability criterion’ was not satisfied).
55
56. REVIEW
This module covered:
• accounting for income tax under IAS 12, which requires the
application of the balance sheet liability method
• the core principle of recognition of current and future tax
consequences of:
• transactions and other events of the current period that are
recognised in an entity’s financial statements
• the future recovery (settlement) of the carrying amount of assets
(liabilities) that are recognised in an entity’s statement of
financial position.
• recognition of deferred tax assets and liabilities
• special considerations for assets measured at revalued amounts
• presentation and disclosure requirements.
56