IFRS AT A GLANCE

IAS 12 Income Taxes

 As at 1 January 2017

IAS 12 Income Taxes

Also refer: Effective Date
SIC-25 Income Taxes – Changes in the Tax Status of an Entity or its Shareholders Periods beginning on or after 1 January 1998

CURRENT TAX DEFINITIONS – TEMPORARY DIFFERENCE AND TAX BASE

· Recognise liability for unsettled portion of tax expense Temporary difference: Difference between the carrying amount of an asset/liability and its tax base.
· Recognise an asset to the extent amounts paid exceed
amounts due Tax base of an asset Tax base of a liability Tax base of income received in advance
· Tax loss which can be used against future taxable · Is the amount that will be deductible for tax purposes against any · Is its carrying amount · Is its carrying amount
income can be recognised as an asset (deferred tax taxable economic benefits that will flow to the entity when it · Less any amount that will be deductible · Less any revenue that will not be taxable
asset). recovers the carrying amount of the asset for tax purposes in respect of the liability in the future.
· If those economic benefits will not be taxable, the tax base of the in future periods.
asset is equal to its carrying amount.

CURRENT TAX MEASUREMENT

TEMPORARY DIFFERENCES
Measure the asset/liability using the tax rates that are
enacted or substantially enacted at the reporting date. Taxable temporary differences will result in taxable amounts in future when the carrying amount of an asset is recovered or liability is settled.

Deductible temporary differences will result in deductible amounts in future when the carrying amount of an asset is recovered or a liability is settled.

REBUTTABLE PRESUMPTION – FOR

INVESTMENT PROPERTY
Specific quantitative disclosureAT FAIR VALUE
requirements: DEFERRED TAX
UNDER IAS 40
Deferred tax liabilities Deferred tax assets
Presumption - for investment properties at fair value, Recognise liabilities for all taxable temporary Recognise for deductible temporary differences, unused tax losses, unused tax credits to the extent that taxable
deferred tax is calculated assuming the recovery of the differences, except to the extent it arises profit will be available against which the asset can be used, except to the extent it arises from the initial recognition
carrying amount of the investment property, will ultimately from: of an asset/liability, that:
be entirely through sale - regardless of whether this is · Initial recognition of goodwill · Is not a business combination; and
actually managements intention or not. · Initial recognition of an asset/liability that · Does not affect accounting/tax profit.
does not affect accounting or tax profit and
Presumption is rebutted and the carrying amount will the transaction is not a business Recognise for deductible temporary differences arising from investments in subsidiaries and associates to the extent
ultimately be recovered through use over the life of the combination it is probable the temporary difference will reverse in the foreseeable future and there will be available tax profit
asset rather than sale: · Liabilities from undistributed profits from to be utilised.
· If the asset is depreciable; and investments in subsidiaries, branches and
· The asset is held in order to consume the assets benefits associates, and interests in joint ventures A deferred tax asset is recognised for the carry forward of unused tax losses and unused tax credits to the extent
over the life of the asset. where company can control the timing of that it is probable that future taxable profits will be available (i.e. the entity has sufficient taxable temporary
Land – land is not depreciable and therefore the recovery the reversal. differences or there is convincing other evidence that sufficient taxable profits will be available against which the
of land is always through sale. unused tax losses or unused tax credits can be utilised).

DEFERRED TAX - MEASUREMENT

· Measure the balance at tax rates that are expected to apply in the period in which the asset is realised or liability settled based on tax rates that have been enacted
or substantively enacted by the end of the reporting period
· Deferred tax assets and liabilities are not discounted
· 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 recognised 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 recognised, 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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