Chapter 9 Flashcards
What is IAS 12?
Income taxes covers the general principle of accounting for tax
What is current tax?
Estimated amount of tax payable on taxable profits of enterprise in the period
What usually happens with income tax?
Accrued in one period and settled the next
If the amount settled is more than amount recognised, is it an under or over provision?
Under provision
If the amount settled is less than amount recognised, is it an under or over provision?
Over provision
How is tax estimate usually recorded?
DR income tax expense
CR Income tax liability
What is deferred tax?
Future tax consequences of transactions and events recognised in the financial statements of current and previous periods
What is accounting profit?
Profit before tax figure in SPL
What is taxable profit?
Figure on which tax authorities base their tax calculations
What can cause differences between accounting profit and taxable profit?
Permanent differences
Temporary differences
What are temporary differences?
Differences between CA of an asset or liability in SFP and its tax base
What is a deferred tax asset recognised as?
Utilised losses carried forward.
However, asset can only be recognised to extent it is probable that future taxable profit will be available against losses
How do we determine accounting entries required for deferred tax?
- Establish temporary differences at YE
- Calculate YE deferred tax balance
- Record journal entry showing increase/decrease in the deferred tax balance
