Ias 12

4051 Words Mar 19th, 2014 17 Pages
In April 2001 the International Accounting Standards Board adopted IAS 12. IAS 12 has to do with the accounting treatment for Income Taxes. There have been many amendments and changes over the years with the last one being in 2010.
The objective of International Accounting Standard 12 is to advise on the accounting treatment for income taxes. The main issue in accounting for income taxes is how to account for the current and future tax consequences of certain items. One item it advises on is the future recovery or settlement of the carrying amount of assets or liabilities that are recognized in an entity’s statement of financial position. The second main item the standard covers is transactions and other events of the current
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If the carrying amount of the asset exceeds its tax base, the amount of taxable economic benefits will exceed the amount that will be allowed as a deduction for tax purposes. The difference is a taxable temporary difference and the obligation to pay the resulting income taxes in future periods is a deferred tax liability. Over time the entity recovers the carrying amount of the asset and the taxable temporary difference will reverse which will result in taxable profit for the entity. This makes it probable that economic benefits will flow from the entity in the form of tax payments and therefore requires the recognition of all deferred tax liabilities. For taxable temporary differences a deferred tax liability shall be recognized for all taxable temporary differences, except to the extent when the deferred tax liability arises from the initial recognition of goodwill, or the initial recognition of an asset or liability in a transaction that is not a business combination and at the time of the transaction neither affects taxable profit or loss not accounting profit. There are certain rules pertaining to investments in subsidiaries, branches and associates that are covered in a later section.
When income or expense is included in accounting profit in one period and included in taxable profit in a different period a temporary difference also arises. Temporary differences such as these are described as timing

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