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IAS 12: Accounting for Income Taxes
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IAS 12: Accounting for Income Taxes

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Questions and Answers

What is the main focus of IAS 12?

  • Recognition of deferred tax assets/liabilities
  • Tax consequences of transactions
  • Accounting treatment for financial statements
  • Accounting treatment for income taxes (correct)
  • How does the standard treat tax consequences compared to the transaction itself?

  • Only in other comprehensive income
  • Only in profit/loss
  • In the same way (correct)
  • Differently
  • What triggers the recognition of deferred tax assets/liabilities according to IAS 12?

  • Taxable profit based on tax authorities' rules
  • Differences between tax and accounting rules (correct)
  • Adjustments in equity
  • Temporary differences between carrying amount and tax base
  • What is the difference between accounting profit and taxable profit?

    <p>Treatment of expenses/income</p> Signup and view all the answers

    How are deferred tax assets calculated according to IAS 12?

    <p>From temporary differences between carrying amount and tax base</p> Signup and view all the answers

    When are deferred income taxes measured according to IAS 12?

    <p>Using enacted/substantively enacted tax rates by the reporting period's end</p> Signup and view all the answers

    Explain the purpose of IAS 12 in relation to income taxes.

    <p>IAS 12 prescribes accounting treatment for income taxes, focusing on current and future tax consequences of transactions in financial statements.</p> Signup and view all the answers

    What are temporary differences in accounting for income taxes according to IAS 12?

    <p>Temporary differences are the differences between the carrying amount of assets/liabilities and their tax base.</p> Signup and view all the answers

    How does IAS 12 handle deferred tax assets?

    <p>IAS 12 allows for the recognition of deferred tax assets if future taxable profit is probable for utilization.</p> Signup and view all the answers

    Explain the difference between accounting profit and taxable profit as defined by IAS 12.

    <p>Accounting profit is profit before tax, while taxable profit is based on tax authorities' rules.</p> Signup and view all the answers

    When is current income tax recognized according to IAS 12?

    <p>Current income tax is recognized in profit/loss and is payable on taxable profit at the tax rate.</p> Signup and view all the answers

    How is deferred income tax calculated in relation to transactions?

    <p>Deferred tax is calculated from temporary differences between carrying amount and tax base of assets/liabilities.</p> Signup and view all the answers

    What triggers the recognition of deferred tax liabilities/assets according to IAS 12?

    <p>The recognition of deferred tax assets/liabilities is triggered when tax rules differ from accounting rules.</p> Signup and view all the answers

    How are deferred income taxes measured in accordance with IAS 12?

    <p>Deferred income taxes are measured using enacted/substantively enacted tax rates by the period's end.</p> Signup and view all the answers

    In what way does IAS 12 align the treatment of tax consequences with the underlying transactions?

    <p>Tax consequences are accounted for in the same way as the transaction itself, whether in profit/loss or other comprehensive income.</p> Signup and view all the answers

    What is the purpose of recognizing deferred tax assets/liabilities under IAS 12?

    <p>Deferred tax assets/liabilities are recognized to address differences between tax and accounting rules.</p> Signup and view all the answers

    Study Notes

    • IAS 12, issued in 1979, prescribes accounting treatment for income taxes, focusing on current and future tax consequences of transactions in financial statements.
    • Tax consequences are accounted for in the same way as the transaction itself, whether in profit/loss or other comprehensive income.
    • The standard addresses differences between tax and accounting rules, requiring recognition of deferred tax assets/liabilities when tax rules differ.
    • Accounting profit is profit before tax, while taxable profit is determined based on tax authorities' rules, leading to differences due to expenses/income treatment.
    • Current income tax is payable on taxable profit at the tax rate and is recognized in profit/loss, with exceptions for adjustments in equity or other comprehensive income.
    • Deferred tax is an accounting measure to match tax effects with transactions, calculated from temporary differences between carrying amount and tax base of assets/liabilities.
    • Temporary differences are calculated as carrying amount minus tax base, leading to taxable or deductible temporary differences and consequent deferred tax liabilities/assets.
    • Deferred tax assets can also arise from unused tax losses or credits, provided future taxable profit is probable for utilization.
    • Deferred income tax is measured using enacted/substantively enacted tax rates by the reporting period's end and reflects the expected recovery/settlement manner of assets/liabilities.
    • Deferred tax is typically recognized in profit/loss, with exceptions for transactions recognized outside profit/loss, such as in other comprehensive income or equity.
    • Presentation of income taxes in financial statements involves offsetting current tax assets/liabilities under specific conditions and presenting disclosures related to income taxes as per IAS 12 requirements.

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    Description

    Explore the accounting treatment prescribed by IAS 12 for income taxes, focusing on current and future tax consequences in financial statements. Learn about deferred tax assets/liabilities, temporary differences, calculating deferred tax, and recognizing income taxes in profit/loss.

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