Deferred Tax Without the Fog
Calculate a deferred tax liability from a taxable temporary difference under IAS 12.
Equipment has an IFRS carrying amount of $780,000 and a tax base of $520,000. The enacted tax rate is 25%. IAS 12 temporary difference model The common shortcut is to start from the current tax return. Deferred tax instead starts from statement-of-financial-position carrying amounts and tax bases. 1. Compare bases Carrying amount $780,000 - tax base $520,000 = $260,000 temporary difference. The difference shows future tax consequences when the asset is recovered. 2. Determine direction Because the asset carrying amount exceeds tax base, recovery creates taxable amounts in future periods. For assets, carrying amount above tax base commonly points to…
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