IAS 12 - taxation

Question 1

Do taxation payments related to the accounting period in which they are made?

Answer 1

No, not necessarily

Question 2

How does a company get around the time delays in tax calculations

Answer 2

They include an estimation of corporation tax payable which will then be subject to adjustments

Question 3

What are the elements of the tax charge?

Answer 3

Tax payable for the current period

Adjustments to the tax charge for previous accounting periods (i.e. difference between estimated and final calc)

Deferred taxation

Question 4

What is the T account entry for taxation in yr 1 and yr 2?

Answer 4

Yr 1 - estimated tax
Dr Corporation tax
Cr Tax liability

Yr 2 - Adj for yr 1 change & yr 2 estimate
Dr Corporation tax (change + yr 2)
Cr Tax liab (Change + yr 2)

Payment of yr 1:
Dr Tax liab
Cr cash