16 Questions
What is the main focus of IAS 12?
Accounting treatment for income taxes
How does the standard treat tax consequences compared to the transaction itself?
In the same way
What triggers the recognition of deferred tax assets/liabilities according to IAS 12?
Differences between tax and accounting rules
What is the difference between accounting profit and taxable profit?
Treatment of expenses/income
How are deferred tax assets calculated according to IAS 12?
From temporary differences between carrying amount and tax base
When are deferred income taxes measured according to IAS 12?
Using enacted/substantively enacted tax rates by the reporting period's end
Explain the purpose of IAS 12 in relation to income taxes.
IAS 12 prescribes accounting treatment for income taxes, focusing on current and future tax consequences of transactions in financial statements.
What are temporary differences in accounting for income taxes according to IAS 12?
Temporary differences are the differences between the carrying amount of assets/liabilities and their tax base.
How does IAS 12 handle deferred tax assets?
IAS 12 allows for the recognition of deferred tax assets if future taxable profit is probable for utilization.
Explain the difference between accounting profit and taxable profit as defined by IAS 12.
Accounting profit is profit before tax, while taxable profit is based on tax authorities' rules.
When is current income tax recognized according to IAS 12?
Current income tax is recognized in profit/loss and is payable on taxable profit at the tax rate.
How is deferred income tax calculated in relation to transactions?
Deferred tax is calculated from temporary differences between carrying amount and tax base of assets/liabilities.
What triggers the recognition of deferred tax liabilities/assets according to IAS 12?
The recognition of deferred tax assets/liabilities is triggered when tax rules differ from accounting rules.
How are deferred income taxes measured in accordance with IAS 12?
Deferred income taxes are measured using enacted/substantively enacted tax rates by the period's end.
In what way does IAS 12 align the treatment of tax consequences with the underlying transactions?
Tax consequences are accounted for in the same way as the transaction itself, whether in profit/loss or other comprehensive income.
What is the purpose of recognizing deferred tax assets/liabilities under IAS 12?
Deferred tax assets/liabilities are recognized to address differences between tax and accounting rules.
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.
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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