PPT: Accounting Standards (12) | Advanced Accounting for CA Intermediate PDF Download

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INCOME TAXES
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INCOME TAXES
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INCOME TAXES
? Prescribe accounting treatment for income taxes
? Account for current and future tax consequences of:
• Transactions recognised in the current period
• Future recovery of assets in the balance sheet
• Future settlement of liabilities in the balance sheet
? Recognise a deferred tax liability if recovery of an asset will increase 
future tax payments 
? Recognise a deferred tax asset if settlement of a liability will cause 
decrease future tax payments
? Recognise tax effects in same way as the transaction causing the 
effect
• Profit of loss
• Directly in equity
• By adjusting goodwill
? Recognise deferred tax assets from unused tax losses or credits
? Presentation and disclosure of income taxes
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INCOME TAXES
? Prescribe accounting treatment for income taxes
? Account for current and future tax consequences of:
• Transactions recognised in the current period
• Future recovery of assets in the balance sheet
• Future settlement of liabilities in the balance sheet
? Recognise a deferred tax liability if recovery of an asset will increase 
future tax payments 
? Recognise a deferred tax asset if settlement of a liability will cause 
decrease future tax payments
? Recognise tax effects in same way as the transaction causing the 
effect
• Profit of loss
• Directly in equity
• By adjusting goodwill
? Recognise deferred tax assets from unused tax losses or credits
? Presentation and disclosure of income taxes
?Income taxes
• Domestic and foreign taxes based on taxable 
profits
• Withholding and other taxes payable by 
subsidiaries on distribution to the reporting entity
• Excludes government grants and investment tax 
credits but includes temporary differences arising 
from them
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INCOME TAXES
? Prescribe accounting treatment for income taxes
? Account for current and future tax consequences of:
• Transactions recognised in the current period
• Future recovery of assets in the balance sheet
• Future settlement of liabilities in the balance sheet
? Recognise a deferred tax liability if recovery of an asset will increase 
future tax payments 
? Recognise a deferred tax asset if settlement of a liability will cause 
decrease future tax payments
? Recognise tax effects in same way as the transaction causing the 
effect
• Profit of loss
• Directly in equity
• By adjusting goodwill
? Recognise deferred tax assets from unused tax losses or credits
? Presentation and disclosure of income taxes
?Income taxes
• Domestic and foreign taxes based on taxable 
profits
• Withholding and other taxes payable by 
subsidiaries on distribution to the reporting entity
• Excludes government grants and investment tax 
credits but includes temporary differences arising 
from them
? Accounting profit: profit or loss for the period before deducting tax
? Taxable profit: accounting profit adjusted for rules of tax regime forming the 
basis on which tax is charged
? Tax expense: amount of current and deferred tax in profit or loss for the 
period
? Current tax: income tax payable on taxable profit for the current period
? Deferred tax liability: income tax payable in future periods on taxable 
temporary differences
? Deferred tax asset: income tax recoverable in future periods on 
• Deductible temporary differences
• Unused tax losses carried forward
• Unused tax credits carried forward
? Temporary differences:  difference between carrying amount of an asset or 
liability in the balance sheet and its tax base
• Taxable temporary differences: will result in taxable amounts in future periods when carrying 
amount of asset or liability is recovered or settled
• Deductible temporary differences: will result in tax deductible amounts in future periods when 
carrying amount is recovered or settled
? Tax base: amount attributed to an asset or liability for tax purposes
? Tax expense/income: Current tax and deferred tax expense/income