Chapter 19, Problem 5ICA

To determine

International Financial Reporting Standard (IFRS): An international standard for identifying, analyzing and recording the transactions related to money or money’s worth for a period is compiled under the head International Financial Reporting Standard (IFRS). It gives detailed instruction on the procedure of recording the business transactions.

Deferred tax asset: The process of paying over and above the required level of tax is termed as deferred tax asset. These taxes are calculated and paid on the future expected income. In case if the future expected inflow of cash reduces, then the company can claim the excess tax paid in the form of tax relief or refund.

Deferred tax liability: Some business activities may create dissimilarity in the amount recorded in the books and the taxable income. Those differences create deferred tax liability. For example, Mr.J is a car dealer who sold a car on installment. In actual the sale happened in the current year but the benefits are receivable in the future years. This creates a difference in the books of accounts and the taxable account.

To understand: To understand the procedure of classifying and reporting the deferred expense.