INCOME TAXES

Philippine Accounting Standards (PAS) 12

Objective and Scope

PAS 12 is to prescribe the accounting treatment for
income taxes.

Accounting profit vs. Taxable profit

For purposes of PAS 12, Income Taxes refer to taxes
that are based on taxable profit
1. Acounting Profit or Loss
 Computed using PFRSs
 Total income less total expenses,
excluding tax expense
 Other term: taxable income financial
income and accounting income
2. Taxable Profit (Tax Loss)
 Computed using tax laws
 Taxable income less taxed ductible
expenses
 Other terms: pretax income,

I.E. Entity A accrues bad debts expense of P100 under

financial reporting. However, under taxation, this
amount is tax deductible only when it is deemed
worthless. Profit before bad debts is Php1,000.

Requirement: How much is the accounting income and

taxable income? Assuming tax rate is 30%, how much is
the income/current tax expense?