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Accounting For Income Tax
Accounting For Income Tax
Accounting For Income Tax
ACCOUNTING
FOR INCOME
TAX
Accounting profit – It is the profit or loss for a period before
deducting tax expense.
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Taxable profit (tax loss) - The profit (loss) for a period,
determined in accordance with the rules established by the
taxation authorities, upon which income taxes are payable
(recoverable).
Tax bases
Unrecognized items. If items have a tax base but are not recognized in
the statement of financial position, the carrying amount is nil.
Tax bases not immediately apparent. If the tax base of an item is not
immediately apparent, the tax base should effectively be determined in
such as manner to ensure the future tax consequences of recovery or
settlement of the item is recognized as a deferred tax amount.
Current tax assets and current tax liabilities can only be offset in the
statement of financial position if the entity has the legal right and
the intention to settle on a net basis.
Deferred tax assets and deferred tax liabilities can only be offset in
the statement of financial position if the entity has the legal right to
settle current tax amounts on a net basis and the deferred tax
amounts are levied by the same taxing authority on the same entity
or different entities that intend to realize the asset and settle the
liability at the same time.
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Recognition of deferred tax liabilities
Deferred tax assets for deductible temporary differences arising from investments in sub-
sidiaries, branches and associates, and interests in joint arrangements, are only recognized
to the extent that it is probable that the temporary difference will reverse in the foreseeable
future and that taxable profit will be available against which the temporary difference will be
utilized.
The carrying amount of deferred tax assets are reviewed at the end of each reporting period
and reduced to the extent that it is no longer probable that sufficient taxable profit will be
available to allow the benefit of part or all of that deferred tax asset to be utilized.
A deferred tax asset is recognized for an unused tax loss carry forward or unused tax credit
if, and only if, it is considered probable that there will be sufficient future taxable profit
against which the loss or credit carry forward can be utilized.