f7課件14 ias12 income taxes_W

1、IAS12 Income taxLevel1Level 2OptionalCurrent taxYDeferred tax basic conceptYYTax base AssetYYTemporary differencesYYQuestionYYRevalued assetsYYTaxation in company accountsYTax base of an liabilityYCurrent taxCurrent tax is the amount payable to the tax authorities in relation to the trading activiti

2、es of the period. It is generally straightforward.You would calculate the amount of tax due to be paid on the companys taxable profits and with this amount you would:DEBITCREDITTax charge (statement of profit or loss)Tax liability (statement of financial position)QuestionIn 20X8 Darton Co had taxabl

3、e profits of $120,000. In the previous year (20X7) income tax on 20X7 profits had been estimated as $30,000. The corporate income tax rate is 30%.RequiredCalculate tax payable and the charge for 20X8 if the tax due on 20X7 profits was subsequently agreed with the tax authorities as:(a) $35,000; or(b

4、) $25,000.Answer(a)$ 36,0005,00041,000Tax due on 20X8 profits ($120,000 30%) Underpayment for 20X7Tax charge and liability(b)$ 36,000(5,000)31,000Tax due on 20X8 profits (as above) Overpayment for 20X7Tax charge and liabilityExample: tax losses carried backIn 20X7 Eramu Co paid $50,000 in tax on its

5、 profits. In 20X8 the company made tax losses of $24,000. The local tax authority rules allow losses to be carried back to offset against current tax of prior years.The tax rate is 30%.RequiredShow the tax charge and tax liability for 20X8.SolutionTax repayment due on tax losses = 30% * $24,000 = $7

6、,200.The double entry will be:DEBITCREDITTax receivable (statement of financial position)Tax repayment (statement of profit or loss)$7,200$7,200Youre a Champion!Thanks for staying with us. You have finished this task.Deferred taxBefore we go any further, let us be clear about the difference between

7、current and deferred tax.a)Current tax is the amount actually payable to the tax authorities in relation to the trading activities of the entity during the period.Deferred tax is an accounting measure, used to match the tax effects of transactions with their accounting impact and thereby produce les

8、s distorted results.b)Exam focus pointDeferred tax is an accounting measure used to match the tax effects of transactions with their accounting impact. It is quite complex.Students invariably find deferred tax very confusing. You are unlikely to be asked any very complicated questions on deferred ta

9、x in F7, so concentrate on understanding and being able to explain the purpose of deferred tax and to carry out basic calculationsWhat is deferred tax?Key termsTemporary differences are differences between the carrying amount of an asset or liability in the statement of financial position and its ta

10、x base.The tax base of an asset or liability is the amount attributed to that asset or liability for tax purposes.Key termsTemporary differences may be either:Taxable temporary differences, which are temporary differences that will result in taxable amounts in determining taxable profit (tax loss) o

11、f future periods when the carrying amount of the asset or liability is recovered or settledDeductible temporary differences, which are temporary differences that will result in amounts that are deductible in determining taxable profit (tax loss) of future periods when the carrying amount of the asse

12、t or liability is recovered or settledKey termsDeferred tax liabilities are the amounts of income taxes payable in future periods in respect of taxable temporary differences.Deferred tax assets are the amounts of income taxes recoverable in future periods in respect of:Deductible temporary differenc

13、esThe carry forward of unused tax losses The carry forward of unused tax creditsYoure a Champion!Thanks for staying with us. You have finished this task.Tax base - assetThe tax base of an asset is the amount that will be deductible for tax purposes against any taxable economic benefits that will flo

14、w to the entity when it recovers the carrying value of the asset.Where those economic benefits are not taxable, the tax base of the asset is the same as its carrying amount.So where the carrying amount and the tax base of the asset are different, a temporary difference exists.Tax base of an asset Ex

15、1a)A machine cost $10,000 and has a carrying amount of$8,000. For tax purposes, depreciation of $3,000 has already been deducted in the current and prior periods and the remaining cost will be deductible in future periods, either as depreciation or through a deduction on disposal. Revenue generated

16、by using the machine is taxable, any gain on disposal of the machine will be taxable and any loss on disposal will be deductible for tax purposes.a)The tax base of the machine is $7,000. The temporary difference is $1,000.Tax base of an asset Ex2b)Interest receivable has a carrying amount of $1,000.

17、 The related interest revenue will be taxed on a cash basis.b)The tax base of the interest receivable is nil. The temporary difference is $1,000.Tax base of an asset Ex3c)Trade receivables have a carrying amount of$10,000. The related revenue has already been included in taxable profit (tax loss).c)

18、The tax base of the trade receivables is $10,000. No temporary difference.Tax base of an asset Ex4d)A loan receivable has a carrying amount of $1m. The repayment of the loan will have no tax consequences.d)The tax base of the loan is $1m. No temporary difference.Youre a Champion!Thanks for staying w

19、ith us. You have finished this task.TemporarydifferencesPermanentdifferences.Permanent differences. These occur when certain items of revenue or expense are excluded from the computation of taxable profits (for example, entertainment expenses may not be allowable for tax purposes).Temporarydifferenc

20、es.Temporary differences. These occur when items of revenue or expense are included in both accounting profits and taxable profits, but not for the same accounting period.For example, an expense which is allowable as a deduction in arriving at taxable profits for 20X7 might not be included in the fi

21、nancial accounts until 20X8 or later.In the long run, the total taxable profits and total accounting profits will be the same (except for permanent differences) so that timing differences originate in one period and are capable of reversal in one or more subsequent periods.Deferred tax is the tax at

22、tributable to temporary differences.Example: taxable temporary differencesA company purchased an asset costing $1,500. At the end of 20X8 the carrying amount is $1,000. The cumulative depreciation for tax purposes is $900 and the current tax rate is 25%.RequiredCalculate the deferred tax liability f

23、or the asset.SolutionFirstly, what is the tax base of the asset? It is $1,500 $900 =$600.In order to recover the carrying amount of $1,000, the entity must earn taxable income of $1,000, but it will only be able to deduct $600 as a taxable expense.The entity must therefore pay income tax of $400 * 2

24、5% =$100 when the carrying amount of the asset is recovered.The entity must therefore recognise a deferred tax liability of$400 * 25% = $100, recognising the difference between the carrying amount of $1,000 and the tax base of $600 as a taxable temporary difference.Youre a Champion!Thanks for stayin

25、g with us. You have finished this task.QuestionQuestionJonquil Co buys equipment for $50,000 on 1 January 20X1 and depreciates it on a straight line basis over its expected useful life of five years. It has no other non-current assets.For tax purposes, the equipment is depreciated at 25% per annum o

26、n a straight line basis.Accounting profit before tax for the years 20X1 to 20X5 is$20,000 per annum. The tax rate is 40%. Required:Show the calculations of current and deferred tax for the years 20X1 to 20X5.AnswerThe differences between accounting and tax depreciation on the equipment will be:20X1$

27、 10,00012,5002,5002,50020X2$ 10,00012,5002,5005,00020X3$ 10,00012,5002,5007,50020X4$ 10,00012,5002,50010,00020X5$ 10,000- (10,000)-Accounting depreciation Tax depreciation Taxable difference Cumulative differenceNote that the taxable difference reverses in 20X5, when the equipment is fully depreciat

28、ed for tax purposes.This will give the following differences between the carrying amount and the tax base of the asset at the end of each year.20X1$ 40,00037,5002,5001,00020X2$ 30,00025,0005,0002,00020X3$ 20,00012,5007,5003,00020X4$ 10,000- 10,0004,00020X5$-Carrying amount at Y/E Tax base at Y/E Cum

29、ulative difference Deferred tax 40%-The tax charge to profit or loss will be as follows:20X1$ 20,00010,000(12,500)17,5007,0001,0008,00020X2$ 20,00010,000(12,500) 17,5007,0001,0008,00020X3$ 20,00010,000(12,500) 17,5007,0001,0008,00020X4$ 20,00010,000(12,500) 17,5007,0001,0008,00020X5$ 20,00010,000- 3

30、0,00012,000(4,000)8,000Profit for the year Add back depreciationDeduct tax depreciation Taxable amountTax charge 40% Deferred tax adjustment*Tax charge in profit or loss*2,500 x 40%The statements of financial position will show:20X1$20X2$20X3$20X4$20X5$Non current liabilitiesDeferred tax Current lia

31、bilities Income tax payable1,0002,0003,0004,000-7,0007,0007,0007,00012,000RecognitionNormally as with current tax, deferred tax should normally be recognised as income or an expense and included in the net profit or loss for the year in the statement of profit or loss.Current and deferred tax will t

32、ogether make up the tax charge.Why do we recognise deferred tax?Adjustments for deferred tax are made in accordance with the accruals concept and in accordance with the definition of a liability in the Conceptual Framework, ie a past event has given rise to an obligation in the form of increased tax

33、ation which will be payable in the future. The amount can be reliably estimated. A deferred tax asset similarly meets the definition of an asset.Youre a Champion!Thanks for staying with us. You have finished this task.Revalued assetsRecognitionNormally as with current tax, deferred tax should normal

34、ly be recognised as income or an expense and included in the net profit or loss for the year in the statement of profit or loss. Current and deferred tax will together make up the tax charge.The exception is where the tax arises from a transaction or event which is recognised (in the same or a diffe

35、rent period) directly in equity such as a revaluation where the surplus is credited to the revaluation surplus.Revalued assetsUnder IAS 16 assets may be revalued. This changes the carrying amount of the asset but the tax base of the asset is not adjusted. Consequently, the taxable flow of economic b

36、enefits to the entity as the carrying value of the asset is recovered will differ from the amount that will be deductible for tax purposes.The difference between the carrying amount of a revalued asset and its tax base is a temporary difference and gives rise to a deferred tax liability.ExampleZ Co

37、owns a property which has a carrying amount at the beginning of 20X9 of $1,500,000. At the year end it has entered into a contract to sell the property for $1,800,000. The tax rate is 30%. How will this be shown in the financial statements?SolutionThe amounts will be posted as follows:Dr$000 300Cr$0

38、00Property, plant and equipment Deferred taxRevaluation surplus90210STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME (EXTRACT)$000XProfit for the yearOther comprehensive income: Gains on property revaluation300Income tax relating to components of other comprehensive income(300 30%)Other co

39、mprehensive income for the year net of tax(90)210Youre a Champion!Thanks for staying with us. You have finished this task.Taxation in company accountsTaxation in the statement of profit or lossThe tax on profit on ordinary activities is calculated by aggregating:a)b)c)Income tax on taxable profits T

40、ransfers to or from deferred taxationAny under provision or overprovision of income tax on profits of previous yearsTaxation in the statement of financial positionThere will usually be a liability for tax assessed as due for the current year. If no tax is payable (or very little), then there might b

41、e an income tax recoverable asset disclosed in current assetsWe may also find a liability on the deferred taxation account. Deferred taxation is shown under non-current liabilities in the statement of financial position.Ex1The following trial balance relates to Highwood at 31 March 2011:$000$000Curr

42、ent tax (note (iv)800Deferred tax (note (iv)2,600(iv) The balance on current tax represents the under/over provision of the tax liability for the year ended 31 March 2010. The required provision for income tax for the year ended 31 March 2011 is $194 million. The difference between the carrying amou

43、nts of the net assets of Highwood and their (lower) tax base at 31 March 2011 is$27 million. Highwoods rate of income tax is 25%.Statement of comprehensive income for the year ended 31 March 2011Income tax expense (19,400 800 + 4150 (w (iv)(22,750)Statement of financial position as at 31 March 2011N

44、on-current liabilitiesDeferred tax (w (iv)6,750Current liabilitiesCurrent tax payable19,400Deferred taxbalance at 1 April 20102,600charge to income statementBalance figure4,150at 31 March 201127,000 x 25%6,750Ex2The following trial balance relates to Highwood at 31 March 2011:$000$000Current tax (no

45、te (iv)800Deferred tax (note (iv)2,600(iv) The balance on current tax represents the under/over provision of the tax liability for the year ended 31 March 2010. The required provision for income tax for the year ended 31 March 2011 is $194 million. The difference between the carrying amounts of the

46、net assets of Highwood and their (lower) tax base at 31 March 2011 is $27 million. Highwoods rate of income tax is 25%.Statement of comprehensive income for the year ended 31 March 2011Income tax expense (19,400 + 800 + 4150 (w (iv)(24,350)Statement of financial position as at 31 March 2011Non-curre

47、nt liabilitiesDeferred tax (w (iv)6,750Current liabilitiesCurrent tax payable19,400Deferred taxbalance at 1 April 20102,600charge to income statementBalance figure4,150at 31 March 201127,000 x 25%6,750Ex3The following trial balance relates to Highwood at 31 March 2011:$000$000Current tax (note (iv)8

48、00Deferred tax (note (iv)2,600(iv) The balance on current tax represents the under/over provision of the tax liability for the year ended 31 March 2010. The required provision for income tax for the year ended 31 March 2011 is $194 million. The difference between the carrying amounts of the net asse

49、ts of Highwood (including the revaluation of the property 15,000) and their (lower) tax base at 31 March 2011 is $27 million. Highwoods rate of income tax is 25%.Statement of comprehensive income for the year ended 31 March 2011Income tax expense (19,400 800 + 400 (w (iv)(19,000)Other comprehensive

50、income:Gain on revaluation of property (w (i) Deferred tax on revaluation (w (i)15,000(3,750)Statement of financial position as at 31 March 2011Non-current liabilitiesDeferred tax (w (iv)6,750Current liabilitiesCurrent tax payable19,400Deferred taxbalance at 1 April 20102600revaluation of property15

51、,000 x 25%3750charge to income statementBalance figure400at 31 March 201127,000 x 25%6,750Ex4The following trial balance relates to Highwood at 31 March 2011:$000$000Current tax (note (iv)800Deferred tax (note (iv)2,600(iv) The balance on current tax represents the under/over provision of the tax li

52、ability for the year ended 31 March 2010. The required provision for income tax for the year ended 31 March 2011 is $194 million. The difference between the carrying amounts of the net assets of Highwood (excluding the revaluation of the property 15,000) and their (lower) tax base at 31 March 2011 i

53、s $27 million. Highwoods rate of income tax is 25%.Statement of comprehensive income for the year ended 31 March 2011Income tax expense (19,400 800 + 4150 (w (iv)(22,750)Other comprehensive income:Gain on revaluation of property (w (i) Deferred tax on revaluation (w (i)15,000(3,750)Statement of financial position as at 31 March 2011Non-current liabilitiesDeferred tax (w (iv)10,500Current liabilitiesCurrent tax payable19,400Deferred taxbala