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Guide Income Tax Accounting
- 1. INCOME TAXES 06/08/09 IAS 12
- 10. 06/08/09 IAS 12
- 13. 06/08/09 IAS 12
- 15. 06/08/09 IAS 12
- 17. 06/08/09 IAS 12
- 21. 06/08/09 IAS 12
- 22. 06/08/09 IAS 12 Year Carrying Amount Tax Base Timing Difference Tax Rate Deferred Tax Liability Deferred Tax Charge 1 80 75 5 .25 1.25 1.25 2 60 50 10 .25 2.5 1.25 3 40 25 15 .25 3.75 1.25 4 20 Nil 20 .25 5 1.25 5 nil nil nil .25 nil -5 Asset = £100 Annual depreciation = £20 Tax deduction = £25 Current tax rate = 25% If tax deduction accelerated (> than depreciation) recognise DT liability If tax deduction decelerated (< depreciation) recognise DT asset
- 23. 06/08/09 IAS 12
- 28. 06/08/09 IAS 12 Carrying amount Tax base Taxable income Income tax Year 1 1,000 Nil 1000 400 Year 2 800 Nil 800 320 Year 3 600 Nil 600 240 Year 4 400 Nil 400 160 Year 5 200 Nil 200 80 Asset cost: £1,000 Useful economic life: 5 years Residual value: nil Income tax rate 40%; Capital base cost nil (Capital loss not allowed) Depreciation is not tax deductible To recover the carrying amount of the asset, the entity will earn taxable income in each year, resulting in income tax charges. The entity does not recognise the resulting deferred tax liability at the end of each period, because it results from the initial recognition of the asset.
- 30. 06/08/09 IAS 12
- 32. 06/08/09 IAS 12 Carrying amount £ Tax deductible £ Tax base £ Deductible temporary difference Deferred Tax asset £ 100 100 nil 100 25 Tax deductible when the entity pays claims Income tax rate 25% Carrying amount (CA): Dr Provision (IS), Cr Liability (BS) Tax deductible amount: CA when paid in future Tax base (TB): CA – TDfp = 100 – 100 = 0 Deductible temporary difference: CA – TB = 100 – 0 = 100 Deferred tax asset: DTD x income tax rate = 100 x .25 = 25
- 36. 06/08/09 IAS 12 Balance sheet Income statement Tax asset Debit Tax Liability Credit Total Tax expense Debit Tax income Credit Total DTA 50 50 DTL 100 50 DTL 100 50 exp CT charge 500 500 CT deduct 150 150 DTA reverse 50 50 DTL reverse 100 300 TL 100 300 exp
- 42. 06/08/09 IAS 12