How to Calculate Deferred Tax PDF

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Summary

List the Assets Liabilities on split up PPE into various the Carrying Amounts as per the SFP (IAS 16) accounting for NRV the Tax Base : USE RULES (par FLOW par 7 (amount still to be deducted for tax in future if none, then TB Amount deductible for tax purposes against any taxable economic benefits f...

Description

List the Assets & Liabilities on SFP - split up PPE into various items

State/Calculate the Carrying Amounts as per the SFP (IAS 16) [after accounting for NRV etc.]

Calculate the Tax Base : USE RULES (par 7-9) & FLOW CHART Asset: par 7 (amount still to be deducted for tax in future – if none, then TB=0) 1. TB = Amount deductible for tax purposes against any taxable economic benefits flowing to entity when recovers CA of asset. 2. If economic benefits not taxable, TB = CA. Liability: par 8 1. TB = CA – amounts deductible for tax purposes in future 2. For Income Received in Advance: TB = CA – revenue not taxable in future Neither A nor L: par 9 (TB = future deduction) Items with a TB but not recognised as A or L e.g. research expenses

Taxable

Calculate difference between CA and TB = Temporary Difference Deductible



Determine if EXEMPT (ALL 4 criteria) o Temporary difference arose on initial recognition o Transaction not a business combination o At time, affected neither accounting profit/ loss (consider jnl entry) o Nor taxable profit/loss (tax deductions etc. before taken into use)

Liability = owed on profit



IF NOT, multiply TD by 28% = Deferred Tax Deductible = recoverable on profit

Movement due to: ∆ Tax Rate: this must be done first! 1. Re-measure Opening Balance of DT a/c using new rate (x new/old) 2. Calculate current Temporary Differences @ new rate 3. Keep separate for DISCLOSURE purposes 4. Only 1 jnl entry Temporary Differences: 1. Calculate difference between opening and closing DT a/c balance 2. Answer is movement recorded in SPLOCI

1. A or L

2. CA

3. Tax Base

4. Temp Diff

5. Deferred Tax

6.Movement to SPLOCI

Identify if CREDIT balance is a liability or revenue received in advance.

Will there be taxable economic benefits when CA of ASSET is recovered in future?

YES

TAX BASE = amount deductible for tax in future (against taxable benefit)

NO

LIABILITY

TAX BASE = Carrying Amount

TAX BASE = Liability amount deductible for tax purposes in future

TAX BASE = Future deduction e.g. Research Expenses

IRA

TAX BASE = IRA - revenue not taxable in future...