Chapter 8 - Income taxes Flashcards
Deferred Taxes
Arises because of Timing and temporary differences
They do not arise because of permanent differences
Deferred Tax examples
Difference in useful life of assets considered for acc and tax purposes
Business losses which can be carried forward and set off against taxable gains
Permanent Difference
Any expense which gets additional deduction or is not allowed as deduction
Deferred Tax Liability
The difference arising When the tax base of an asset is less than the book value
December 2006
Book Value = $550,000
Tax Value = $500,000
2006 Tax rate 25%
2007 Tax rate 30%
Deferred Tax?
$550,000 - $500,000
= $50,000 difference
Tax rate is the one expected to apply when the liability is settled (2007)
30% x $50,000 = $15,000
Deferred Tax Liability
Current Tax
The amount of income taxes payable in respect of the taxable profit for a period - IAS 12