Deferred Tax

Question 1

IAS12 - what is current tax?

Answer 1

The amount payable to the tax authorities in relation to trading activities of the company.

Question 2

IAS12 - what is deferred tax?

Answer 2

accounting measure used to match the tax effects of transactions with their accounting treatment. it is more an application of the accrual process and not something that needs to be paid.

Question 3

carrying amount ?

Answer 3

the amount recognised in the statement of financial position

Question 4

tax base?

Answer 4

the amount that is attributed to that asset or liability for tax purposes

Question 5

What happens if the carrying amount is greater than the tax base?

Answer 5

There is a “taxable temporary differences” which means there is future tac to pay so there is a deferred tax liability .

Question 6

What happens if the carrying amount is less than the tax base?

Answer 6

Then there is a “deductible temporary differences” which means future tax payments will be reduces so there is a deferred tax asset.

Question 7

How do you determine the deferred tax balance

Answer 7

Multiply the temporary difference by the tax rate.

Question 8

How do you account for deferred tax liabilities and assets?

Answer 8

Deferred tax Liability
Dr Tax charge in the SPL
Cr deferred tax liability

Deferred tax asset
Dr deferred tax asset
Cr tax charge in the SPL

Question 9

What are the summary steps for Deferred tax?

Answer 9

1. calculate the temporary differences
2. multiply the temp differences by the appropriate tax rate
3. post the movement on the deferred tax asset or liability