Using the fundamental principle from IAS 12 Income Tax, explain whether a deferred tax asset or a deferred tax liability should be recognised in relation to the following scenarios. 1.     Development costs Development costs of $1000 that are recognised as an asset (i.e. capitalised) and will be amortised to the statement of P/L and OCI. The costs were deducted in determining taxable profit when they were incurred (i.e. when the cash was paid). 2.     Trade Receivables Carrying amount of trade receivables is $150. The $150 is net of expected doubtful debts of $50.

Q: Which of the following represents the total dollar amount of revenue actually received by the…

A: Income generated before accounting for taxes, offers insight into operational profitability.Computed…

Q: What is meant by “tax allocation within a period”? What is the justification for such practice?

A: Tax: Tax refers to a compulsory payment or a contribution to the state revenue, levied by the…

Q: Using the straight-line method of depreciation for reporting purposes and accelerateddepreciation…

A: To offset the amount of a deferred tax asset , valuation allowance is used.  A deferred tax asset is…

Q: A. For some assets, straight-line depreciation is used for tax purposes while double-declining…

A: “Since you have posted a question with many sub-parts, we will solve three sub-parts for you. To get…

Q: Using straight-line depreciation for financial reporting purposes and accelerated depreciation for…

A: when the company uses the straight-line method of depreciation for financial reporting purposes and…

Q: Listed below are items that are commonly accounted for differently for financial reporting purposes…

A: Financial accounting refers to the accounting which helps in keeping a logical as well as systematic…

Q: What is the difference between a future taxable amount and a future deductible amount? When is it…

A:

Q: Briefly explain the concepts of accounting profit, taxable profit, temporary difference, taxable…

A: Accounting is primarily concerned with identifying, recording, measuring, summarizing transactions…

Deferred Tax

Deferred tax is an estimated future tax which is made while preparing accounts. It is estimated as a result of past and present transactions in the financial statements. It is not the actual tax which needs to be paid or refundable from the revenue authority, it is an accounting entry. It exists because of the difference between accounting profits and taxable profits.