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Questions and Answers
According to IAS 12, when might a temporary difference arise when an asset is revalued?
According to IAS 12, when might a temporary difference arise when an asset is revalued?
What is the primary accounting standard that permits property, plant, and equipment to be carried at a revalued amount after initial recognition?
What is the primary accounting standard that permits property, plant, and equipment to be carried at a revalued amount after initial recognition?
When an asset is revalued upwards and the tax base remains unchanged, what type of temporary difference typically arises?
When an asset is revalued upwards and the tax base remains unchanged, what type of temporary difference typically arises?
How do temporary differences impact the recognition of deferred tax assets or liabilities?
How do temporary differences impact the recognition of deferred tax assets or liabilities?
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What is the effect on deferred tax if the tax base of a revalued asset is adjusted by a different amount than the revaluation increase?
What is the effect on deferred tax if the tax base of a revalued asset is adjusted by a different amount than the revaluation increase?
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Which section of IAS 12 deals with the recognition of current and deferred taxes?
Which section of IAS 12 deals with the recognition of current and deferred taxes?
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Under IFRS, what happens if an asset's tax base and carrying amount are both $100 before an upward revaluation?
Under IFRS, what happens if an asset's tax base and carrying amount are both $100 before an upward revaluation?
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When the tax base of an asset is adjusted to reflect its revalued amount, what is the immediate impact on temporary differences?
When the tax base of an asset is adjusted to reflect its revalued amount, what is the immediate impact on temporary differences?
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When an entity purchases an asset, what is generally the initial relationship between the asset's tax base and its cost?
When an entity purchases an asset, what is generally the initial relationship between the asset's tax base and its cost?
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How does claiming tax depreciation each period affect the tax base of an asset over time?
How does claiming tax depreciation each period affect the tax base of an asset over time?
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When the carrying amount of a revalued asset is expected to be recovered through use, how is the tax base affected by the revaluation?
When the carrying amount of a revalued asset is expected to be recovered through use, how is the tax base affected by the revaluation?
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What gives rise to a taxable temporary difference when a revalued asset is used to provide goods and services?
What gives rise to a taxable temporary difference when a revalued asset is used to provide goods and services?
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If an entity expects to recover the carrying amount of an asset by using it, where is the deferred tax relating to the revaluation recognized according to IAS 12?
If an entity expects to recover the carrying amount of an asset by using it, where is the deferred tax relating to the revaluation recognized according to IAS 12?
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If an asset had not been revalued, where would the deferred tax liability be recognized?
If an asset had not been revalued, where would the deferred tax liability be recognized?
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When an entity expects to recover the carrying amount by selling the asset, what is the general tax treatment of proceeds that reflect recovered tax depreciation?
When an entity expects to recover the carrying amount by selling the asset, what is the general tax treatment of proceeds that reflect recovered tax depreciation?
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How are the proceeds from the sale of an asset generally divided?
How are the proceeds from the sale of an asset generally divided?
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If an asset is sold for its revalued amount, and capital gains tax applies, on what amount is the capital gains tax calculated?
If an asset is sold for its revalued amount, and capital gains tax applies, on what amount is the capital gains tax calculated?
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In a regime where there is no capital gains tax, how are the sale proceeds in excess of the initial cost treated?
In a regime where there is no capital gains tax, how are the sale proceeds in excess of the initial cost treated?
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What happens to the tax base and carrying amount of an asset after it is sold?
What happens to the tax base and carrying amount of an asset after it is sold?
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What amount is used to recognize a deferred tax liability if it expects to recover the carrying amount by using the asset?
What amount is used to recognize a deferred tax liability if it expects to recover the carrying amount by using the asset?
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What is the initial tax base of an asset when an entity first purchases it?
What is the initial tax base of an asset when an entity first purchases it?
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What is the amount of capital gain that will be exempt from income if the asset is sold for the revalued amount of $150, and there is no capital gains tax applicable?
What is the amount of capital gain that will be exempt from income if the asset is sold for the revalued amount of $150, and there is no capital gains tax applicable?
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If the asset will be sold for the revalued amount of $150, and capital gains tax applies, on what amount will the capital gain of be subject to income tax?
If the asset will be sold for the revalued amount of $150, and capital gains tax applies, on what amount will the capital gain of be subject to income tax?
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When an entity expects to recover the carrying amount of an asset through sale and capital gains taxes are not applicable, what primarily gives rise to a taxable temporary difference?
When an entity expects to recover the carrying amount of an asset through sale and capital gains taxes are not applicable, what primarily gives rise to a taxable temporary difference?
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In a scenario where capital gains tax applies, what components make up the $150 sales proceeds from an asset that has been revalued to $150?
In a scenario where capital gains tax applies, what components make up the $150 sales proceeds from an asset that has been revalued to $150?
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When capital gains taxes are applicable and an entity expects to recover the carrying amount of an asset through sale, what two components together make up the future taxable income?
When capital gains taxes are applicable and an entity expects to recover the carrying amount of an asset through sale, what two components together make up the future taxable income?
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How does the expected manner of recovering the carrying amount of an asset affect the deferred tax liability?
How does the expected manner of recovering the carrying amount of an asset affect the deferred tax liability?
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What is the key implication of IAS 12 paragraph 51B regarding a non-depreciable asset revalued according to IAS 16?
What is the key implication of IAS 12 paragraph 51B regarding a non-depreciable asset revalued according to IAS 16?
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A piece of land with a cost of $100 is revalued to $150. If the tax rate applicable to sale is 20%, and the tax rate applicable to use is 30%, what tax rate is used to calculate the deferred tax liability?
A piece of land with a cost of $100 is revalued to $150. If the tax rate applicable to sale is 20%, and the tax rate applicable to use is 30%, what tax rate is used to calculate the deferred tax liability?
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A piece of land with a cost of $100 is revalued to $150. If tax rate applicable from sale is 20%. What is the deferred tax liability?
A piece of land with a cost of $100 is revalued to $150. If tax rate applicable from sale is 20%. What is the deferred tax liability?
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When the carrying amount is expected to be recovered by using the asset and capital gains taxes are not applicable, the entity is likely to generate future taxable income through sale equal to the _________.
When the carrying amount is expected to be recovered by using the asset and capital gains taxes are not applicable, the entity is likely to generate future taxable income through sale equal to the _________.
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When the carrying amount is expected to be recovered by using the asset and capital gains taxes are not applicable, the future amount deductible against that taxable income is the_________.
When the carrying amount is expected to be recovered by using the asset and capital gains taxes are not applicable, the future amount deductible against that taxable income is the_________.
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When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the entity is likely to generate future taxable income through sale equal to the taxable capital gain component of _________ the initial cost.
When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the entity is likely to generate future taxable income through sale equal to the taxable capital gain component of _________ the initial cost.
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When an asset is revalued upwards and the tax base is adjusted by the same amount, what is the impact on temporary differences?
When an asset is revalued upwards and the tax base is adjusted by the same amount, what is the impact on temporary differences?
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If a tax jurisdiction does not allow the tax deduction to be altered in response to a revaluation, how is the taxable temporary difference calculated?
If a tax jurisdiction does not allow the tax deduction to be altered in response to a revaluation, how is the taxable temporary difference calculated?
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When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the future amount deductible against that taxable income is the _________.
When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the future amount deductible against that taxable income is the _________.
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When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the deferred tax liability is $60 x 30% = _________.
When the carrying amount is expected to be recovered by selling the asset and capital gains taxes are applicable, the deferred tax liability is $60 x 30% = _________.
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According to IAS 12, how should current or deferred tax be recognized when it relates to items credited or charged directly to equity?
According to IAS 12, how should current or deferred tax be recognized when it relates to items credited or charged directly to equity?
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Where should a revaluation increase be recognized, according to IAS 16?
Where should a revaluation increase be recognized, according to IAS 16?
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In relation to a non-depreciable asset revalued, the tax consequences to consider (including the tax rates to apply to calculate the deferred tax) are those that would follow from the recovery of the carrying amount of that asset through _________.
In relation to a non-depreciable asset revalued, the tax consequences to consider (including the tax rates to apply to calculate the deferred tax) are those that would follow from the recovery of the carrying amount of that asset through _________.
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An asset is revalued upwards by $80, and the tax rate is 30%. If the revaluation increase is recognized in OCI, what is the amount of deferred tax liability to be recognized?
An asset is revalued upwards by $80, and the tax rate is 30%. If the revaluation increase is recognized in OCI, what is the amount of deferred tax liability to be recognized?
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After the revaluation, the resulting temporary difference is taxed at a rate of _________ per cent.
After the revaluation, the resulting temporary difference is taxed at a rate of _________ per cent.
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What is the after-tax amount of a revaluation increase of $80, recognized in the revaluation surplus, if the deferred tax liability is $24?
What is the after-tax amount of a revaluation increase of $80, recognized in the revaluation surplus, if the deferred tax liability is $24?
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For a non-depreciable asset, the rate that is applicable when calculating any deferred tax implications is the tax from _________.
For a non-depreciable asset, the rate that is applicable when calculating any deferred tax implications is the tax from _________.
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If an entity transfers a portion of the revaluation surplus to retained earnings as the revalued assets are used, how does IAS 12 specify the amount should be transferred?
If an entity transfers a portion of the revaluation surplus to retained earnings as the revalued assets are used, how does IAS 12 specify the amount should be transferred?
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What is the basis for calculating the tax base, according to IAS 12 paragraph 51, when determining temporary differences related to assets and liabilities?
What is the basis for calculating the tax base, according to IAS 12 paragraph 51, when determining temporary differences related to assets and liabilities?
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A depreciable asset is revalued to $150. Immediately before revaluation, its carrying amount was $80, and the tax written-down value was $70. What is the temporary difference if the asset is expected to be recovered through use?
A depreciable asset is revalued to $150. Immediately before revaluation, its carrying amount was $80, and the tax written-down value was $70. What is the temporary difference if the asset is expected to be recovered through use?
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Which of the following best describes the principle adopted by IAS 12 for accounting for the tax effects of a transaction?
Which of the following best describes the principle adopted by IAS 12 for accounting for the tax effects of a transaction?
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What is the appropriate accounting treatment for a revaluation increase that reverses a previous decrement recognized in profit or loss?
What is the appropriate accounting treatment for a revaluation increase that reverses a previous decrement recognized in profit or loss?
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According to paragraph 41 of IAS 16, what option is offered to entities regarding the revaluation surplus?
According to paragraph 41 of IAS 16, what option is offered to entities regarding the revaluation surplus?
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In a jurisdiction where the tax treatment differs between assets held for use and assets held for sale, what impact does this have on the temporary difference arising from a revaluation?
In a jurisdiction where the tax treatment differs between assets held for use and assets held for sale, what impact does this have on the temporary difference arising from a revaluation?
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What is the effect on the financial statements of recognizing a deferred tax liability related to a revaluation increase?
What is the effect on the financial statements of recognizing a deferred tax liability related to a revaluation increase?
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If cumulative depreciation of $30 was previously allowed for tax purposes, what happens when an asset is revalued upwards?
If cumulative depreciation of $30 was previously allowed for tax purposes, what happens when an asset is revalued upwards?
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Under IAS 12, how should deferred tax related to items recognized in other comprehensive income (OCI) be treated?
Under IAS 12, how should deferred tax related to items recognized in other comprehensive income (OCI) be treated?
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According to IAS 12, what should deferred tax assets and liabilities be measured using?
According to IAS 12, what should deferred tax assets and liabilities be measured using?
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When an asset is revalued, and the tax base of the asset is adjusted by the same amount as the change in the carrying amount, what is the result?
When an asset is revalued, and the tax base of the asset is adjusted by the same amount as the change in the carrying amount, what is the result?
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If the revaluation of an asset is recognized in OCI, where is the related deferred tax recognized?
If the revaluation of an asset is recognized in OCI, where is the related deferred tax recognized?
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What is the primary objective of the presentation and disclosure requirements of IAS 12?
What is the primary objective of the presentation and disclosure requirements of IAS 12?
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According to IAS 1, how should deferred tax assets and deferred tax liabilities be presented in the statement of financial position?
According to IAS 1, how should deferred tax assets and deferred tax liabilities be presented in the statement of financial position?
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Which of the following is not a required disclosure under IAS 12?
Which of the following is not a required disclosure under IAS 12?
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When measuring deferred tax liabilities and assets, an entity should consider:
When measuring deferred tax liabilities and assets, an entity should consider:
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ABC Ltd. has a machine with a carrying amount of $500,000 and a tax base of $300,000. The applicable tax rate is 25%. What is the amount of the deferred tax liability?
ABC Ltd. has a machine with a carrying amount of $500,000 and a tax base of $300,000. The applicable tax rate is 25%. What is the amount of the deferred tax liability?
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Which of the following is the correct accounting treatment for revaluation surplus?
Which of the following is the correct accounting treatment for revaluation surplus?
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ABC Ltd. has unused tax losses of $1,000,000. They believe it is probable that future taxable profits will be available to utilize $600,000 of these losses. The tax rate is 30%. What amount of deferred tax asset should be recognized?
ABC Ltd. has unused tax losses of $1,000,000. They believe it is probable that future taxable profits will be available to utilize $600,000 of these losses. The tax rate is 30%. What amount of deferred tax asset should be recognized?
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According to the provided text, what is a taxable or deductible temporary difference?
According to the provided text, what is a taxable or deductible temporary difference?
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ABC Ltd. has a current tax liability of $191,500 in 20X1. Where is this amount presented in the financial statements?
ABC Ltd. has a current tax liability of $191,500 in 20X1. Where is this amount presented in the financial statements?
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In Example 4.16, ABC Ltd. recognizes a receivable of $100,000 for accrued interest revenue, which is taxable when received in cash. How does this impact the deferred taxes?
In Example 4.16, ABC Ltd. recognizes a receivable of $100,000 for accrued interest revenue, which is taxable when received in cash. How does this impact the deferred taxes?
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ABC Ltd. incurred a statutory fine of $50,000 for violating environmental laws. This fine is non-deductible for tax purposes. How should this fine be treated?
ABC Ltd. incurred a statutory fine of $50,000 for violating environmental laws. This fine is non-deductible for tax purposes. How should this fine be treated?
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Under what conditions can current tax assets and liabilities be presented as a single net amount in the statement of financial position?
Under what conditions can current tax assets and liabilities be presented as a single net amount in the statement of financial position?
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What is a critical factor in deciding whether to recognize a deferred tax asset related to unused tax losses?
What is a critical factor in deciding whether to recognize a deferred tax asset related to unused tax losses?
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According to IAS 12, what information about deductible temporary differences and unused tax losses must be disclosed in the notes to the financial statements when no deferred tax asset is recognized?
According to IAS 12, what information about deductible temporary differences and unused tax losses must be disclosed in the notes to the financial statements when no deferred tax asset is recognized?
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What is the main objective of the presentation and disclosure requirements within IAS 12 concerning income taxes?
What is the main objective of the presentation and disclosure requirements within IAS 12 concerning income taxes?
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When can deferred tax assets and deferred tax liabilities be offset in the statement of financial position?
When can deferred tax assets and deferred tax liabilities be offset in the statement of financial position?
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What specific explanation must be provided in the notes to the financial statements regarding the relationship between accounting profit and tax expense (income)?
What specific explanation must be provided in the notes to the financial statements regarding the relationship between accounting profit and tax expense (income)?
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Why might a deferred tax liability not be recognised on the unremitted earnings of subsidiaries?
Why might a deferred tax liability not be recognised on the unremitted earnings of subsidiaries?
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What is the implication of unused tax losses not being recognized as a deferred tax asset?
What is the implication of unused tax losses not being recognized as a deferred tax asset?
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What triggers a deferred tax liability related to translating financial statements of a group's subsidiaries?
What triggers a deferred tax liability related to translating financial statements of a group's subsidiaries?
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What is a potential benefit of implementing technologies like Ernst & Young’s Automated Ledger Review Tool in the context of income tax reporting?
What is a potential benefit of implementing technologies like Ernst & Young’s Automated Ledger Review Tool in the context of income tax reporting?
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What is the total tax expense (income) as per the example provided?
What is the total tax expense (income) as per the example provided?
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What component decreases the current tax expense according to the reconciliation of accounting profit?
What component decreases the current tax expense according to the reconciliation of accounting profit?
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Which of the following statements is true regarding the relationship between tax expense and accounting profit?
Which of the following statements is true regarding the relationship between tax expense and accounting profit?
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What table provides an example of the note disclosure of the relationship between tax expense and accounting profit?
What table provides an example of the note disclosure of the relationship between tax expense and accounting profit?
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In the reconciliation process, what is the first step mentioned?
In the reconciliation process, what is the first step mentioned?
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What is generally added to the accounting profit to arrive at taxable profit?
What is generally added to the accounting profit to arrive at taxable profit?
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What is the prima facie tax rate used in the examples provided?
What is the prima facie tax rate used in the examples provided?
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Which component can cause a difference between accounting profit and taxable income?
Which component can cause a difference between accounting profit and taxable income?
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How is the deferred tax expense related to tax benefits from prior unrecognised tax losses calculated?
How is the deferred tax expense related to tax benefits from prior unrecognised tax losses calculated?
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What is the effect of local tax rate changes on total income tax expense?
What is the effect of local tax rate changes on total income tax expense?
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What should be included in the related notes to the financial statements concerning tax expense?
What should be included in the related notes to the financial statements concerning tax expense?
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What term refers to tax computed at the standard tax rate applied to accounting profit before tax?
What term refers to tax computed at the standard tax rate applied to accounting profit before tax?
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Which of the following represents a liability relating to deferred tax?
Which of the following represents a liability relating to deferred tax?
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What should be considered when determining the relationship between tax expense and profit?
What should be considered when determining the relationship between tax expense and profit?
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What was the accounting profit before tax for the year ended 30 June 20Y0?
What was the accounting profit before tax for the year ended 30 June 20Y0?
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What is the current tax payable for the year ended 30 June 20Y0 calculated at a tax rate of 30%?
What is the current tax payable for the year ended 30 June 20Y0 calculated at a tax rate of 30%?
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What are the deferred tax liabilities presented in the statement for the year ended 30 June 20Y0?
What are the deferred tax liabilities presented in the statement for the year ended 30 June 20Y0?
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Under what conditions can current tax assets and liabilities be presented as a single net amount?
Under what conditions can current tax assets and liabilities be presented as a single net amount?
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What is the required disclosure for the components of tax expense in financial statements?
What is the required disclosure for the components of tax expense in financial statements?
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What amount is reported as the taxable profit for 20Y0?
What amount is reported as the taxable profit for 20Y0?
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Which line item reflects the combined tax outcomes for current and deferred taxes?
Which line item reflects the combined tax outcomes for current and deferred taxes?
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What was the current tax payable for the year ended 30 June 20X9?
What was the current tax payable for the year ended 30 June 20X9?
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What key condition must be met for deferred tax assets and liabilities to be offset?
What key condition must be met for deferred tax assets and liabilities to be offset?
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Which expense was added to the taxable profit for the year ended 30 June 20Y0?
Which expense was added to the taxable profit for the year ended 30 June 20Y0?
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What does the deferred tax liability on the statement of financial position represent?
What does the deferred tax liability on the statement of financial position represent?
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What is the tax expense for the year ended 30 June 20Y0 if the taxable profit is $850,000?
What is the tax expense for the year ended 30 June 20Y0 if the taxable profit is $850,000?
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How is income tax expense presented in the profit and loss statement according to IAS 1?
How is income tax expense presented in the profit and loss statement according to IAS 1?
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What amount of deferred tax liability was reported for the year ended 30 June 20X9?
What amount of deferred tax liability was reported for the year ended 30 June 20X9?
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Which of the following items should NOT be added back to accounting profit to arrive at taxable profit?
Which of the following items should NOT be added back to accounting profit to arrive at taxable profit?
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What is required for the reconciliation of tax expense and accounting profit according to IAS 12?
What is required for the reconciliation of tax expense and accounting profit according to IAS 12?
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What is included in the presentation of deferred tax assets and liabilities?
What is included in the presentation of deferred tax assets and liabilities?
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In the reconciliation of tax expense to accounting profit, what is the tax impact of non-deductible expenses likely to cause?
In the reconciliation of tax expense to accounting profit, what is the tax impact of non-deductible expenses likely to cause?
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What basis is required for the calculation of applicable tax rates in reconciliations?
What basis is required for the calculation of applicable tax rates in reconciliations?
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What must be disclosed regarding unrecognized deferred tax assets and liabilities?
What must be disclosed regarding unrecognized deferred tax assets and liabilities?
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Regarding deferred tax liabilities for property, plant, and equipment, what does a negative figure indicate?
Regarding deferred tax liabilities for property, plant, and equipment, what does a negative figure indicate?
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What is one of the fundamental purposes of presenting information about temporary differences?
What is one of the fundamental purposes of presenting information about temporary differences?
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Under IAS 12, what is the significance of presenting both applicable and effective tax rates?
Under IAS 12, what is the significance of presenting both applicable and effective tax rates?
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How should the tax effect of non-deductible expenses be calculated for reconciliation?
How should the tax effect of non-deductible expenses be calculated for reconciliation?
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What is the total deferred tax for employee benefits in 2018, as per the example provided?
What is the total deferred tax for employee benefits in 2018, as per the example provided?
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Which item is NOT typically a temporary difference leading to deferred tax?
Which item is NOT typically a temporary difference leading to deferred tax?
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What amount of tax losses carried forward was recognized in 2018?
What amount of tax losses carried forward was recognized in 2018?
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What does the average effective tax rate represent in financial reporting?
What does the average effective tax rate represent in financial reporting?
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Why is it considered important to understand the nature of each type of temporary difference?
Why is it considered important to understand the nature of each type of temporary difference?
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Flashcards
Fair Value
Fair Value
The price at which an asset would sell in an orderly transaction between market participants.
Tax Base
Tax Base
The amount attributed to an asset or liability for tax purposes, used to determine taxable income.
Temporary Difference
Temporary Difference
The difference between the carrying amount of an asset or liability and its tax base.
Carrying Amount
Carrying Amount
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OCI (Other Comprehensive Income)
OCI (Other Comprehensive Income)
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Revaluation Surplus
Revaluation Surplus
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Deferred Tax Liability
Deferred Tax Liability
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Tax Rate
Tax Rate
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IAS 12
IAS 12
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Current Tax
Current Tax
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Revaluation Increase Accounting
Revaluation Increase Accounting
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Recovering Asset Value
Recovering Asset Value
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Tax Deduction Adjustment
Tax Deduction Adjustment
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Transfer to Retained Earnings
Transfer to Retained Earnings
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Depreciation Difference
Depreciation Difference
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Revalued Amounts
Revalued Amounts
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Taxable Temporary Difference
Taxable Temporary Difference
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Illustrative Examples
Illustrative Examples
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Capital Gains Tax Cost Base
Capital Gains Tax Cost Base
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Recovery of Carrying Amount
Recovery of Carrying Amount
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Capital Gain
Capital Gain
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Tax Base of an Asset
Tax Base of an Asset
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Tax Written-Down Amount
Tax Written-Down Amount
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Capital Gains Tax Applies
Capital Gains Tax Applies
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Sale Proceeds
Sale Proceeds
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Tax Depreciation
Tax Depreciation
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Initial Cost of Asset
Initial Cost of Asset
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Exemption from Income Tax
Exemption from Income Tax
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Income Tax Rate on Sale
Income Tax Rate on Sale
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Recovery of Cost
Recovery of Cost
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Capital Gains Tax
Capital Gains Tax
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Tax Deductions
Tax Deductions
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Revaluation of Assets
Revaluation of Assets
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Cost Base for Capital Gains
Cost Base for Capital Gains
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Tax Rate for Sale
Tax Rate for Sale
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Expected Manner of Recovery
Expected Manner of Recovery
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Non-Depreciable Asset
Non-Depreciable Asset
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Future Deductible Amounts
Future Deductible Amounts
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Example of Deferred Tax Liability
Example of Deferred Tax Liability
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Tax Expense Reconciliation
Tax Expense Reconciliation
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Numerical Reconciliation Method 1
Numerical Reconciliation Method 1
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Numerical Reconciliation Method 2
Numerical Reconciliation Method 2
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Deferred Tax Assets
Deferred Tax Assets
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Deferred Tax Liabilities
Deferred Tax Liabilities
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Applicable Tax Rate
Applicable Tax Rate
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Effective Tax Rate
Effective Tax Rate
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Statutory Fines
Statutory Fines
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Unrecognised Deferred Tax Assets
Unrecognised Deferred Tax Assets
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Forecasted Tax Losses
Forecasted Tax Losses
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Profit or Loss Statement
Profit or Loss Statement
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Tax Effect of Expenses
Tax Effect of Expenses
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Financial Position Statement
Financial Position Statement
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IAS 12 Requirements
IAS 12 Requirements
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Accounting Profit Before Tax
Accounting Profit Before Tax
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Taxable Profit
Taxable Profit
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Current Tax Payable
Current Tax Payable
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Offsetting Tax Assets and Liabilities
Offsetting Tax Assets and Liabilities
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Major Components of Tax Expense
Major Components of Tax Expense
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Current Tax Expense
Current Tax Expense
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Deferred Tax Expense
Deferred Tax Expense
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Income Tax Expense Disclosure
Income Tax Expense Disclosure
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Tax Credits
Tax Credits
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Adjustments to Current Tax Expense
Adjustments to Current Tax Expense
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OCI
OCI
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Tax expense
Tax expense
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Presentation requirements
Presentation requirements
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Recognition criteria
Recognition criteria
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Equity recognition
Equity recognition
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Tax loss
Tax loss
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Unused tax credits
Unused tax credits
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Tax on Taxable Profit
Tax on Taxable Profit
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Tax Benefit from Unrecognized Losses
Tax Benefit from Unrecognized Losses
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Accounting Profit
Accounting Profit
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Relationship between Tax Expense and Accounting Profit
Relationship between Tax Expense and Accounting Profit
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Reconciliation Process
Reconciliation Process
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Prima Facie Tax
Prima Facie Tax
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Non-Deductible Expenses
Non-Deductible Expenses
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Foreign Earnings Tax
Foreign Earnings Tax
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Underprovision in Prior Period
Underprovision in Prior Period
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Unused Tax Losses
Unused Tax Losses
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Withholding Tax
Withholding Tax
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IAS 12 Compliance
IAS 12 Compliance
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Components of Tax Expense
Components of Tax Expense
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Net Tax Position
Net Tax Position
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Tax Expense Relationship
Tax Expense Relationship
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Study Notes
Revalued Asset Considerations
- Revalued assets are carried at fair value, less accumulated depreciation/impairment.
- Temporary differences arise if the tax base isn't adjusted equally.
- If the tax base is adjusted, no temporary difference arises.
- Revaluation impacts deferred tax(liability/asset) recognition.
Revaluation Effects
- An upward revaluation (e.g., from 100to100 to 100to180) creates no temporary difference if the tax base is adjusted correspondingly.
- If the tax base remains unchanged, a temporary difference (taxable) results.
Deferred Tax Recognition on Revaluation
- Deferred tax impacts are consistent with the accounting treatment.
- Recognition is in Other Comprehensive Income (OCI) if the revaluation is in OCI.
- If in equity, deferred tax also goes in equity.
Recovery of Revalued Assets
- Tax base calculation considers expected recovery methods (use or sale).
- Use: Future taxable income equals revalued amount; future deductible = tax written-down amount.
- Sale: Capital gains tax applies; proceeds taxable above initial cost/tax cost base.
Non-Depreciable Asset Recovery
- For non-depreciable assets, tax consequences follow the sale method.
Financial Statement Presentation
- Current and deferred tax assets/liabilities are separate line items in the statement of financial position.
- IAS 1 prohibits deferred tax as current assets/liabilities.
- Current tax amounts can be net when there's a legal right and net settlement intent.
- Deferred tax amounts are net if a shared tax authority.
Major Components of Tax Expense
- Major components of tax expense are disclosed separately, usually in the notes.
- Components include current tax adjustments, deferred tax adjustments, and temp. diff adjustments.
Relationship Between Tax Expense and Accounting Profit
- IAS 12 requires a reconciliation between tax expense (tax income) and accounting profit.
- Explains differences and impacts on both accounting and tax treatment.
Temporary Difference Information
- Disclosure requirements for each temporary difference type include recognised amounts in the statement of financial position and income statement effects.
- Amounts of deferred tax assets/liabilities for each temporary difference are necessary.
- Unrecognised deferred tax assets are also disclosed, including unused tax losses/credits.
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Description
This quiz covers key concepts related to IAS 12, focusing on temporary differences arising from the revaluation of assets. It explores how revaluation impacts deferred tax assets and liabilities, the recognition of current and deferred taxes, and the implications of tax base adjustments. Test your understanding of accounting standards and their application in asset management.
