IAS 12 INCOME TAX

SOPL TAX EXPENSE

1 CURRENT TAX
2 UNDER/OVER PROVISION
3 DEFERRED TAX

CURRENT TAX
TAX PAYABLE ON CURRENT YEAR TAXABLE PROFIT

UNDER/OVER PROVISION
PREVIOUS YEAR CURRENT TAX BALANCE

2008
ESTIMATED TAXABLE PROFIT 10000

CURRENT TAX ???? 3000

estimate; liability

SOPL
TAX EXPENSE -3000

SOFP
CL
CT PAYABLES 3000
(provision)

DEFERRED TAX
FUTURE TAX CONSEQUENCE

ACCOUNTING PROFIT
 CARRYING VALUE

DIFFERENCE
1. PERMANENT DIFFERENCE

ACCOUNTING PROFIT
CARRYING VALUE
WHY??
ENTERTAINMENT EXP RECORDED
POLITICAL DONATIONS RECORDED
FINES RECORDED
NO DEFERRED TAX CREATED

2. TEMPORARY DIFFERENCE
ACCOUNTING PROFIT
CARRYING VALUE
INITIALLY
HOWEVER, AS TIME PASSES BY, THE DIFFERENCE WILL BECO

WHY??
1 ACCRUALS CONCEPT
2 SLM DEPRECIATION
3 REVALUATION GAIN RECORDED

ASSET RULE
1. CV >TB TAXABLE TEMPORARY DIFFERENCE
2. CV < TB DEDUCTIBLE TEMPORARY DIFFERENCE

LIABILITY RULE
4. CV < TB TAXABLE TEMPORARY DIFFERENCE
5. CV > TB DEDUCTIBLE TEMPORARY DIFFERENCE
CALCULATING TAX EXPENSE

CT ESTIMATE (ADDITIONAL INFO)

A: UNDERPROVISION (T.B -> CT Dr)
M: OVERPROVISION (T.B -> CT Cr)
A: INCREASE IN DTL
M: DECREASE IN DTL

TAX EXPENSE

DTL WORKING

OP BAL OF DTL (TRIAL BALANCE)

INCREASE IN DTL
DECREASE IN DTL
CL BAL OF DTL ( ADDITIONAL INFO)
TTD x 30%
NCOME TAX

CURRENT YEAR TAX PAYABLE ON TAXABLE PROFIT

PREV YR TAX BALANCE
FUTURE TAX CONSEQUENCE

EAR TAXABLE PROFIT

X BALANCE

2009
2009 ESTIMATED TAXABLE PROFIT
2008 TAX PAID
2009 CURRENT TAX ????
estimate; libaility
TRIAL BALANCE
CT PAYABLES CR
OVERPROVISION
SOPL
TAX EXPENSE

SOFP
CL
CT PAYABLES
(Provision)

over provision
will reduce the current tax expense

NOT EQUAL TO TAXABLE PROFIT

 NOT EQUAL TO TAX BASE

NOT EQUAL TO TAXABLE PROFIT

NOT EQUAL TO TAX BASE

NOT RECORDED
NOT RECORDED
NOT RECORDED
ERRED TAX CREATED

(TIMING DIFFERENCE)
NOT EQUAL TO TAXABLE PROFIT
NOT EQUAL TO TAX BASE

Y, THE DIFFERENCE WILL BECOME 0

CASH CONCEPT
CAPITAL ALLOWANCE/ TAXABL
NOT RECORDED UNTIL REALISE

CREATE DEFERRED TAX

LE TEMPORARY DIFFERENCE x RATE

TIBLE TEMPORARY DIFFERENCE x RATE

LE TEMPORARY DIFFERENCE x RATE

TIBLE TEMPORARY DIFFERENCE x RATE
NAL INFO) SOFP: CL
.B -> CT Dr)
B -> CT Cr)

SOPL

BALANCE)

(B)
(B)
IONAL INFO) SOFP:NCL
 ASSUME THAT TAX RATE 30%

2010
15000 2010 ESTIMATED TAXABLE PRO
2500 2009 TAX PAID
4500 CURRENT TAX ????
estimate; libaility
TRIAL BALANCE
500 CT PAYABLES

SOPL
-4000 TAX EXPENSE

SOFP
CL
4500 CT PAYABLES
(Provision)

under provision
will increase the current tax expense

TAXABLE PROFIT
TAX BASE
SOPL
AP
GROSS PROFIT 5000
EE -500
TAXABLE PROFIT PD -200
TAX BASE FINES -100
PBT 4200
NOT RECORDED
NOT RECORDED
NOT RECORDED

EXAMPLE1
1. ACCRUAL VS CASH CONCEP
1 ST YR INCOME EARN FROM C
TAXABLE PROFIT 2ND YEAR CASH RECEIVED
TAX BASE
ACCOUNTING RULE

SOPL (AP)
SALES(INCOME)
CASH CONCEPT CTE
CAPITAL ALLOWANCE/ TAXABLE DEPRECIATION DTE
NOT RECORDED UNTIL REALISED
SOFP (CV)
RECEVBLS
DTL
CT PAYABLE

CREATE DTL EXAMPLE2

CREATE DTA AN ASSET WAS PURCHASED AT
FOR TAXATION PURPOSE IT WA
ASSUME THE PROFIT BEFORE T
CREATE DTL
CREATE DTA ACCOUNTING RULE
SOPL (AP)
PBTD
DEP
PBT
TAX EXPENSE
 CT: E
DT
SOFP: CL TOTAL TAX EXP

PAT

SOFP (CV)
CV OF ASSET

LIABILITY
CL:CT PAYABLES

NCL: DTL

DTL INCREASE = INCREASE TA

DTL DECREASE = DECREASE TA
SOFP:NCL
X RATE 30%
SOPL
REVNUE 10000
COS -4000
GP 6000
ADMIN EX -1000
DIST COST -500
PBT 4500
TAX EXPENSE -1350 WRONG

MATED TAXABLE PROFIT 22000 CT ESTIMATE

5100 + UNDERPROVISION (DR)
TAX ???? 6600 - OVERPROVISION (CR)
stimate; libaility = TAX EXPENSE

DR 600 ILLUSTRATION 1:
UNDERPROVISION TRIAL BALANCE
CURRENT TAX DR
7200
ADJUSTMENT
THIS YEAR CURRENT TAX ESTIM
TAX RATE 30%.

6600
Provision) SOPL
TAX EXPENSE

e the current tax expense SOFP

CL
CURRENT TAX PAYABLES
 TAXATION AUTHORITIES
TP
5000
0
0
0
5000

AL VS CASH CONCEPT
COME EARN FROM CREDIT SALE 10000
CASH RECEIVED

UNTING RULE TAXATION RULE

1 2 1
TAX PROFIT
SALES(INCOME)

TAX BASE
RECEVBLS

WAS PURCHASED AT A COST OF 12000. UL 4 YEARS

ATION PURPOSE IT WAS DEPRECIATED AT 45% RBM
HE PROFIT BEFORE TAX AND DEP IS 10000

ACCOUNTING RULE
1 2 3 4 TAXABLE PROFIT
PBTD
TAXAB DEP
TAXABLE PROFIT
 TAX BASE

EASE = INCREASE TAX EXPENSE

EASE = DECREASE TAX EXPENSE

TAX EXPENSE
CT ESTIMATE E XXX
+ UP E XXX
- OP I (XXX)
+ INCREASE IN DTL E XXX
- DECREASE IN DTL I (XXX)
TAX EXPENSE XXX
 ACCOUNTING PROFIT not equal TAXABLE PROF

F7 F6
SOPL - PBT TAXABLE PROF
ACCOUNTING RULES TAXATION RUL
ACCRUALS CONCEPT CASH CONCEPT

CV of an asset not equal Tax base of an as

accouting rule taxation rule
SOFP

ILLUST 1 ILLUST 2
ATE EXP 10000 5000 SOFP: CL
ROVISION (DR) EXP 500
OVISION (CR) INCME -1500
10500 3500 SOPL

ATION 1: ILLUSTRATION 2:
TRIAL BALANCE
TAX DR 500 CURRENT TAX CR

ADJUSTMENT
R CURRENT TAX ESTIMATE $10000. THIS YEAR CURRENT TAX ESTIM
TAX RATE 30%.

SOPL
-10500 TAX EXPENSE

SOFP
CL
TAX PAYABLES 10000 CURRENT TAX PAYABLES
TAXATION RULE
2

CALCULATE TA
TAXATION RULE
TAXABLE PROFIT 1 2 3 4
CURRENT TAX E
TAXAB DEP + UNDERPROVI
TAXABLE PROFIT - OVERPROVISIO
A: INCREASE IN
 L: DECREASE IN

TAX EXPENSE

DEFERRED TAX
OP BAL DTL

TAX BASE
CL BAL DTL
DTL = TTD x RA
 TAXABLE PROFIT

TAXABLE PROFIT
TAXATION RULES
CASH CONCEPT

Tax base of an asset

taxation rule

CR 1500

RRENT TAX ESTIMATE $5000.

-3500

PAYABLES 5000
CALCULATE TAX EXPENSE

1 2
CURRENT TAX ESTIMATE SOFP:CL
+ UNDERPROVISION
- OVERPROVISION
A: INCREASE IN DTL
L: DECREASE IN DTL

TAX EXPENSE SOPL

DEFERRED TAX LIABILITY WORKING

OP BAL DTL
INCREASE (B)
DECREASE (B)
CL BAL DTL SOFP:NCL
DTL = TTD x RATE
3