8. Income Taxes Flashcards
Define Current tax
The amount of income taxes payable (recoverable) in respect of the taxable profit (tax loss) for a period
What is current tax made up of
In statement of profit or loss:
Current tax expense/income for thecurrent period
Under/over provision in respect of prior periods
In the statement of financial positions what items relate to taxation
Current Tax liability for unpaid amounts
Current tax asset for amounts paid in excess of amounts
A asset for a tax loss that can be carried back to recover current tax of a previous period
What is deferred tax
Accoutning treatment of the transaction is different from tax treatment leading to temporary differences
What is temporary difference
Difference between carrying amount of asset/liability vs tax base of an asset/liability
@ The amounts of income taxes payable in the future periods in respect of taxable temporary differences
What are the two types of temporary differences
Taxable temporary differences resulting in a deferred tax liability
Deductible temporary tax differences resulting in deferred tax asset
How is deferred tax calculated
Carrying amount of asset
Less Tax base
= Temp difference
= Deferred tax
x Tax rate
What are the different tax bases
If item is taxed on accruals basis = accrual expense or accrued income
If Item is taxed on a cash basis = Zero
Item is never taxed= Permenent difference so tax base is same as carrying amount so no deferred income
What is accounting entry for increasing deferred tax liability
Debit Deferred tax expense
Credit Deffered tax liability
and then reverse when charge comes
How do you reverse or decerease a deferred tax asset
Credit Tax Asset
Debit Tax expense
Where is deferred tax recognised in statments
Usually it is reported in the Profit or loss
- Otherwise it needs to go to the place where the gain or loss sits
How do you calculate PPE deferred tax held under the cost model
Carrying amount of NCA (cost - accumulated depreciation)
- Less Tax base of NCA (Cost - accumulated tax depreciation)
=
Temp difference
x Tax rate
How do you calculate deferred tax for revluation of non current assets
Carrying amount of asset (inclluding revaluation)
- Tax base of asset ( exclude revaluation)
= Temp dIFF
x Tax rate
= Deferred tax
Revaluation gain - Deferred tax = Balance in revaluation gain
What is accounting treatment for deferred income for revalued asset
Debit: Other Comprehensive Income and revaluation surplus
Credit: Deferred tax liability
Where is deferred tax for revluation asset shown q
In statement of other comprehensive income
As this is where the revluation gain is measured
What is recognised due to losses carried forward
Losses carried forward can reduce current tax on future profuts - so a deferred tax asset is recognised
