IAS 12 Notes PDF

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Summary

Objective: 1. Accounting for current future tax i.r future recovery of carrying amount of A L (in SFP) other txs 2. Presentation Disclosure of Income Tax Scope: Includes domestic foreign tax on taxable also withholding taxes No VAT, rates taxes (not charged on income) Example: Royalty Income Dr Bank...

Description

Objective: 1. Accounting for current & future tax i.r.o - future recovery of carrying amount of A + L (in SFP) - other txs 2. Presentation & Disclosure of Income Tax

Scope: - Includes domestic & foreign tax on taxable profits; also withholding taxes - No VAT, rates + taxes (not charged on income)

Example: Royalty Income

Dr Bank

Gross = R10 000

Dr Tax Expense 1000

9000

Cr Royalty Income

Tax @ 10% :. Withholding Tax = R1000

Conceptual Framework: see booklet for detail 1. Definitions (classify): Asset or Liability 2. Recognition Criteria: Reliably measured; Probable Outflow;

Intro Definitions: Accounting Profit: P or L for period before deducting tax exp. Taxable Profit: P or L for period, determined ito tax authorities Current Tax: income taxes payable/recoverable iro taxable profit (SPLOCI) Tax Base: amount attributed to A or L for tax purposes Effective Rate: income tax expense divided by accounting profit 1

10 000

Recognition: 1. Current & deferred tax recognised as income or an expense in P or L except if arises from tx outside P or L i.e.  

OCI Statement of changes in equity (IAS 8: ∆ Retained Earnings balance – tax implications) If event/tx in P/L, any movement in DT for that event/tx must also go to P/L.

2. CA of DTA & DTL can change, without a ∆TDs, due to:  

∆ Tax Rates Reassessment of recoverability of DTAs

Current Tax Taxable profit = Accounting profit + non-deductible expenses (depreciation) – non-taxable income (dividend income) – tax deductions/temporary differences (timing etc.) Note: tax rate recon for non-deductible expenses & non-taxable incomes (deferred tax NOT included in recon) Measurement:  

Amount expected to be paid to (recovered from) tax authority using rates enacted or substantively enacted by end of reporting period o when change not linked to ∆ tax law: announced in budget = substantively enacted o when change linked to ∆ tax law: approved by Parliament + signed = substantively enacted o changes after reporting period = non-adjusting (:. disclosure required)

Presentation:



Offsetting of current tax A or L: required/permitted; same tax authority + permits it; groups = NO in RSA; Where on face of FS? see booklet



Recognition: if tx accounted for in P/L then current tax effect in P/L too



Disclosure: See booklet ‘Part C’ 2

Deferred Tax (non-current) Potential current tax to be paid in future based on A & L (:. net assets) in SFP:    

Assets: cash hope to collect in future (sell inv.; collect from debtors; PPE used to generate income) Liab.: = claims :. reduces assets & decreases profit in future THUS affects tax to be paid We account for the future tax because a “PAST EVENT” has already taken place (A/L on SFP) Difference between CA (per IFRS) and Tax Base (per Income Tax legislation) :. = tax profit See calculation page and flow diagram.

1. Break up into categories 2. Will benefit be received within 6 months after YE? (WHOLE amount) If so, Current Year Tax Deduction. 3. Separate items – “2nd basket” reviewed for items whose total...