IAS 12 - Income Taxes

Question 1

what is the TAX BASE of an ASSET?

Answer 1

• if FEBs are taxable, TB = future deductions

- If FEBs are non-taxable, TB = CA

Question 2

what is the TAX BASE of a LIABILITY?

Answer 2

CA less future deductions

Question 3

TAX BASE of REV RECEIVED IN ADVANCE?

Answer 3

• it is a liability

- CA - any revenue that will not be taxable in future

Question 4

TAX BASE of INVENTORY?

Answer 4

• future deductions = CA
• the inventory amount in our current SOFP is our closing inventory balance; we will get a s22(2) deduction on this in next tax YOA, as it will be our o/b in the next YOA

Question 5

TAX BASE of TRADE RECEIVABLES?

Answer 5

• carrying amount
• the FEBs will not be taxed as income is taxed at earlier of receipt or accrual. this amount will have been taxed at accrual.

Question 6

taxable temporary difference?

Answer 6

• positive
• deferred tax liability
• future tax profit > future acc profit
• we expect to pay more tax in future

Question 7

deductible temporary difference?

Answer 7

• negative
• deferred tax asset
• future tax profit < future acc profit
• we expect to pay less tax in future

Question 8

what are exceptions for def/tax liability?

Answer 8

• goodwill

- initial recognition that is not in a business combination and affects neither tax profit nor acc profit on recognition

Question 9

how does a PERMANENT DIFFERENCE occur?

Answer 9

SARS and the company do not agree on the treatment of a transaction and this difference in treatments will never unwind over time. no deferred tax.

Question 10

how do we deal with permanent differences?

Answer 10

para 15

- no deferred tax consequences bc differences will never unwind

Question 11

how do we measure D/T?

Answer 11

measurement of a deferred tax A/L shall reflect the tax consequences that would follow from the manner that the entity expects to recover/settle the CA of the A/L (either use, sale, etc)

Question 12

deferred tax consequences for a NON-DEPR ASSET using the REVAL MODEL?

Answer 12

• assume recovery through sale = CGT consequences

Question 13

deferred tax consequences for INV PROPERTY using FV MODEL?

Answer 13

assume recovery through sale (rebuttable presumption), unless:

• depreciable
• held within a business model whose objective is to consume all EBs embodied in the inv property over time rather than through sale

Question 14

TAX BASE for LAND?

Answer 14

• base cost = initial cost
• will not be reduced by capital allowances as land gets no capital allowances
• revaluation of land = CGT (recovered through sale)

Question 15

what happens if there is a change in tax rate for the next YOA?

Answer 15

deferred tax will be calculated using the new rate once the announcement is made

Question 16

what is substantively enacted?

Answer 16

approved by Parliament and signed off by the President

Question 17

when can an entity offset current tax A/L?

Answer 17

if they:

• legally enforceable right, AND
• intends to settle on a net basis or to realize asset and settle liability simultaneously

Question 18

when can an entity offset deferred tax A/L?

Answer 18

if they:
> legally enforceable right, AND
> def/tax A/L relate to income tax levied by the same tax authority on either the:
- same taxable entity
- different entities

Question 19

what to include in disclosure?

Answer 19

• SOFP
• income statement with: OCI, tax expense
• tax rate reconciliation
• major components of tax expense and deferred tax

Question 20

when will the para 15 exemption not apply?

Answer 20

• for a lease liability

- provisions which are capitalized to an asset