Income taxes

Question 1

Is there a difference between the treatment of income tax of full IFRS, IFRS for SME and GRAP?

Answer 1

There is no significant difference between the treatment of income taxes between full IFRS and IFRS for SME’s.

Many public sector entities are exempt from income tax. Therefore, there is no GRAP standard that addresses the treatment of income taxes. Public sector entities that are subject to tax are required per Directive 5 to apply IAS 12, Income Taxes as per full IFRS where necessary.

Question 2

How is allowance for expected credit losses calculated?

Answer 2

Measured using the 12 month credit losses.

SARS allows a 25% deduction

Question 3

How is allowance for expected credit losses over a life time calculated?

Answer 3

The entity may deduct 40%

Question 4

True or False

The deduction that the entity claimed in the previous tax year, must be added back in its current tax calculation

Answer 4

True

Question 5

How is accounting profit calculated

Answer 5

IFRS and utilizing the accrual system

Question 6

Taxable profit is calculated how?

Answer 6

SARS rules

Question 7

True or False

The amount of an assessed loss is limited

Answer 7

False

The amount of an assessed loss is not limited, but utilization is

Question 8

Provide the maximum amount of assessed losses may be utilized against taxable income in a single tax year

Answer 8

The maximum amount that can be utilised against taxable income in a single tax year is the higher of:
- R1 000 000
- 80% of taxable income

Question 9

True or False

The portion of an assessed loss that was not utilised can be carried forward to the next year, when it will again be tested against the limit for tax deductibility.

Answer 9

True

Question 10

What is deferred tax?

Answer 10

A means to record the current and future tax consequences on the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognized in the SFP

Question 11

State step 1 of determining if a item can be deferred

Answer 11

Consider whether the item that causes the difference is a SFP item or not

Question 12

Provide the two exceptions of SFP items of step 1 of determining if they can be deferred

Answer 12

• Research costs
• Unused tax losses

Question 13

State step 2 of determining if a item can be deferred

Answer 13

Does the SFP item lead to a temporary difference (TD)?

Question 14

Provide the formula of determining temporary difference

Answer 14

TD= CA - TB

Question 15

What will lead to a taxable amount in future tax calculations?

Answer 15

If temporary difference leads to deferred Liability

Question 16

What will lead to a deductible amount in future tax calculations?

Answer 16

If temporary difference leads to asset Liability

Question 17

If carrying amount is greater then tax base…

Answer 17

Assetsfuturetaxableincomeismorethanassets futuredeductionsfortaxpurposes thereforefuturetaxableprofit

Question 18

If carrying amount is lesser than tax base…

Answer 18

Assetsfuturetaxableincomeislessthanasset futuredeductionsfortaxpurposestherefore the futuretaxdeductions