1. FAC3701
Income taxes IAS 12

2. OVER VIEW
The objective of this statement is to prescribe the accounting treatment for the current & future tax consequences of:
the future recovery/(settlement) of the carrying amount of assets/(liabilities) that are recognised in an enterprise's statement of financial position, and
transactions and other events of the current period that are recognised in an entity's financial statements.

3. DEFERRED TAX Tax Base OF a liability an asset
asset or liability is the amount attributable to that asset or liability for tax purposes.
Amount will be deductible in future against any taxable economic benefits flowing into the entity when it recovers/settles the carrying amount of the asset.
carrying amount of the liability, less any amount, that will be deductible for tax purposes in respect of that liability in future.

4. Deferred TAX rules Rules Deferred Tax Deferred Tax Asset Liability
1. CAA > TBA 3.CAA < TBA
2. CAL < TBL CAL > TBL
Dr Def Tax expense (SCI) Dr Def Tax Asset- SARS (SFP)
Cr Def Tax Liability – Cr Def Tax (SCI)
Provision Made for Def Tax expense Provision Made for Def Tax.
Deferred Tax
Liability
Deferred Tax
Asset
Rules

5. IAS 12 Income Taxes Differences LIABILITY Payable in Future Due to
Taxable Temporary Differences (Temporary future Profits - from small amounts deductible in future)
ASSET
Recoverable in Future
Due to
Deductible Temporary Differences
Tax Credits Carried Forward
Tax Losses Carried Forward 

6. IAS 12 Income Taxes Objective Except Same Treatment of
Underlying Transactions & Other Events
And Tax Consequences of Transactions & Other Events
for Transactions recognised In equity – thus Tax effects Recognised in equity

7. Financial Position Approach
IAS 12 Income Taxes
Financial Position Approach

8. Financial Position Approach
The balance sheet approach to deferred tax:
[CA – TB = temporary difference] x tax rate = D Tax
To Calculate Deferred Tax
Draw up S F P
Then
Calculate
Deferred Tax
On Closing
amounts
Carry Amounts
Assets and Liabilities
Tax Bases
Assets and Liabilities

9. Exempt Differences Goodwill Initial Recognition Asset / Liability
With Un- Taxable Amortization
Initial Recognition
Asset / Liability
2.2 Neither affects – Accounting or Taxable profit
2.3 Transaction Not a business combination

10. IAS 12 Income Taxes RECOGNITION
Liability – Recognised for ALL – taxable - Temporary Differences
Asset – Recognised – Extent - Probable Taxable Profit – Available- Against which– Deductible- Temporary Differences - Can be utilised

11. ASSETs v/s Liabilities
Resource
Controlled
Past event
Reliable measurement
Cost
Economic Benefits
Expected to flow INTO A S E T

12. ASSETs v/s Liabilities
PRESENT OBLIGATION
PAST EVENT
RELIABLE MEASUREMENT
Economic Benefits
EXPECTED Flow OUT

13. IAS 12 Income Taxes Measurement of
Current Tax / Def tax liability / Def Tax Asset
@ Enacted Tax Rates
Change in Rate Para 47 – results in Adjustment of Opening balances of both Deferred Tax Assets or Liabilites

14. IAS 12 Income Taxes
Pa page 54
Add one more year to the Example

15. IAS 12 Income Taxes