IAS

12 Income Taxes

IAS 12 INCOME TAXES

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Objective Current income

tax

IAS 12

Recognition / Deferred
measurement income tax

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IAS 12 Income Taxes

Objective of IAS 12

To prescribe accounting treatment for the income taxes

??? Difference ???

Accounting profit /
Current tax
loss

versus versus

Taxable profit / loss Deferred tax

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Accounting profit / loss

= profit or loss for the period before deducting tax expense

+ expenses recognized, but non-deductible for tax purposes

+ income not recognized, but included under tax laws

- expenses not recognized, but deductible for tax purposes

- Income recognized, but not under tax laws

Taxable profit / loss

= profit or loss for the period determined in accordance with applicable tax rules

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IAS 12 Income Taxes

Current tax

= amount of income taxes payable (recoverable) in respect of the

taxable profit (tax loss) for a period

Taxable profit / (loss) X Tax rate

Debit: Expenses in the net P/L Credit: Tax liability

Exception: Equity / OCI

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Income Tax

Current tax Deferred tax

SUBSTANCE: - payable to tax office - accounting measure

BASIS: - taxable profit (loss) - temporary differences

TIMING: - current period - future periods

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IAS 12 Income Taxes

Deferred tax: Overview

= income tax payable (recoverable) in future periods in respect of the

temporary differences, unused tax losses and unused tax credits

Temporary difference X Tax rate

Carrying amount - Tax base

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Deferred tax: Tax base

= amount attributed to asset / liability for tax purposes

ASSETS: LIABILITIES:

= amount deductible against any = carrying amount – amount deductible

taxable benefits for tax purposes in the future periods

G Some items are not recognized as assets / liabilities,

but do have a tax base!

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IAS 12 Income Taxes

Deferred tax : Temporary differences

= carrying amount - tax base

Carrying amount > Tax base Carrying amount < Tax base

TAXABLE temporary differences DEDUCTIBLE temporary differences

Deferred tax liability Deferred tax asset

G Tax loss / credit carried forward

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Deferred tax: Taxable temporary differences

Timing differences Business combinations

Assets carried at fair value Initial recognition of an asset / liability

Initial recognition of Where transaction affects neither Liabilities from

goodwill accounting nor taxable profit undistributed profits

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IAS 12 Income Taxes

Deferred tax: Deductible temporary differences

Timing differences Business combinations

Assets carried at fair value Initial recognition of an asset / liability

G Recognize to the extent of taxable profit available for

utilization of deductible temporary differences!

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Deferred tax: Measurement

Tax rates: Applicable in the period of recovery / settlement

Based on rates / laws enacted

Manner: Tax consequences from the expected manner of recovery /

settlement

G No discounting!

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IAS 12 Income Taxes

Deferred tax: Investments

Existence of Foreign exchange Reduction to

undistributed profits rate changes recoverable amount

Deferred tax liability Deferred tax asset

Recognize DTL except for: Recognize DTA only when:

Control over Non-reversal Reversal in Taxable profit

timing probable foreseeable future available

Do not recognize DTL

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Deferred tax: Recognition

= income / expense in the profit or loss for the period except for:

Transaction outside profit / loss Business combination

Other comprehensive income Deferred tax affects goodwill

OR BUT

Directly to equity No DT from initial

recognition of goodwill

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IAS 12 Income Taxes

Income taxes: Presentation and disclosures

OFFSETTING

Current income tax Deferred income tax

- legally enforceable right - when current tax can be offset

- intention to settle on net basis - by the same tax authority

G Number of numerical disclosures!

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www.IFRSbox.com IAS 12 – Income Taxes