IAS

  12   –  INCOME  TAXES

Tax base of an asset Deferred tax liabilities

• Amount that will be deductible for tax purposes against Recognise liabilities for all taxable temporary differences,
any taxable economic benefits that will flow to the entity except to the extent it arises from:
when it recovers the carrying amount of the asset. • Initial recognition of goodwill.
• If those economic benefits will not be taxable, the tax base • Initial recognition of an asset/liability that does not affect
of the asset is equal to its carrying amount. accounting or tax profit and the transaction is not a
business combination.
Tax base of a liability • Liabilities from undistributed profits from investments in
• Is its carrying amount, subsidiaries, branches and associates, and interests in
• LESS any amount that will be deductible for tax purposes joint ventures where company can control the timing of the
in respect of the liability in future periods. reversal.

Tax base of Income received in advance Deferred tax assets

• Is its carrying amount, Recognise for deductible temporary differences, unused tax
• LESS any revenue that will not be taxable in the future. losses, unused tax credits to the extent that taxable profit will
be available against which the asset can be used, except to
Temporary difference the extent it arises from:
Is the difference between the carrying amount of an asset or • The initial recognition of an asset/liability, other than in a
liability in the SOFP and its tax base. These may be; business combination, which does not affect
• Taxable temporary differences will result in taxable accounting/tax profit.
amounts in future when the carrying amount is
recovered/liability settled. Recognise for deductible temporary differences arising from
• Deductible temporary differences will result in deductible investments in subsidiaries and associates to the extent it is
amounts in future when the carrying amount is probable the temporary difference will reverse in the
recovered/liability settled. foreseeable future and there will be available tax profit to be
utilised.
Current Tax
Recognise liability for unsettled portion of tax expense. Assessed loss: A deferred tax asset is recognised for the carry
• Recognise an asset to the extent amounts paid exceed forward of unused tax losses and unused tax credits to the
amounts due. extent that it is probable that future taxable profits will be
• Tax loss which can be used against future taxable income available (i.e. the entity has sufficient taxable temporary
can be recognised as an asset (deferred tax asset). differences or there is convincing other evidence that sufficient
taxable profits will be available against which the unused tax
Current Tax Measurement losses or unused tax credits can be utilised).
Measure the asset/liability using the tax rates that are enacted
or substantially enacted at the reporting date. Deferred Tax - Measurement
• Measure the balance at tax rates that are expected to
The income tax consequences of dividends are recognised apply in the period in which the asset is realized or liability
when a liability to pay the dividend is recognised. settled.
• No discounting
• The applicable tax rate depends on how the carrying
  amount of an asset or liability is recovered or settled.
• Current and deferred tax shall be recognized as income or
an expense and included in profit or loss for the period,
except to the extent that the tax arises from a transaction
or event which is recognized, in the same or a different
period, directly in equity or other comprehensive income,
or a business combination.
• Current tax and deferred tax are charged or credited
directly to equity or other comprehensive income if the tax
relates to items that are credited or charged, in the same
or a different period, directly to equity or other
comprehensive income.

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