This download consists of every topic that will be discussed in third year Financial accounting sciences. It is made according to the University of Pretoria's standard. Every topic is in detail.
Note: tax rate recon for non-deductible expenses & non-taxable incomes (deferred tax
NOT included in recon)
Measurement:
Amount expected to be paid to (recovered from) tax authority
using rates enacted or substantively enacted by end of reporting period
o when change not linked to ∆ tax law: announced in budget = substantively enacted
o when change linked to ∆ tax law: approved by Parliament + signed =
substantively enacted
o changes after reporting period = non-adjusting (:. disclosure
required) Presentation:
Offsetting of current tax A or L: required/permitted; same tax authority + permits it; groups
= NO in RSA;
Where on face of FS? see booklet
Recognition: if tx accounted for in P/L then current tax effect in P/L too
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,Deferred Tax (non-current)
Potential current tax to be paid in future based on A & L (:. net assets) in SFP:
Assets: cash hope to collect in future (sell inv.; collect from debtors; PPE used to generate income)
Liab.: = claims :. reduces assets & decreases profit in future THUS affects tax to be paid
We account for the future tax because a “PAST EVENT” has already taken place (A/L on SFP)
Difference between CA (per IFRS) and Tax Base (per Income Tax legislation) :. = tax profit
NOTE:
2013 SPLOCI: subtract #2
2014 SPLOCI: subtract full prepaid expense; + back #2 (don’t get deduction twice!!)
Measurement:
Amount expected to be paid to (recovered from) tax authority in future
using rates enacted or substantively enacted by end of reporting period
o when change not linked to ∆ tax law: announced in budget = substantively enacted
o when change linked to ∆ tax law: approved by Parliament + signed =
substantively enacted
o changes after reporting period = non-adjusting (:. disclosure required)
DTA & DTL not discounted (impracticable; not comparable bet.
entities) Presentation:
Shall offset DTA and DTL if:
o legally enforceable right
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, o same tax authority
However, if Group – keep DT A/L of parent separate from DT A/L of subsidiaries
Tax expense (Movement in Deferred Tax balance) presented as part of P or L in
SPLOCI Disclosure:
See booklet ‘Part C’
Movement in SPLOCI:
∆ Tax Rate (this done first)
o If question says “change implemented from year ending on/after dd/mm/yyyy”
then both DT & CT
o If question says “change implemented from year starting on/after dd/mm/yyyy”
then only DT but adjustment for CT in recon
TDs
Deferred Tax Liability
Definition: income tax payable in future iro taxable Temp Diffs (TDs that result in
taxable amounts in det. taxable profit of future periods)
Recognition: recognised for ALL taxable TDs EXCEPT:
Arose on initial recognition and
Tx not a business combination and
Tx doesn’t affect accounting profit/loss (consider jnl entry on initial recog) and
Tx doesn’t affect taxable profit/loss
WHY? If not, DTL recognised that will never result in actual claim :. not faithful representation
NOTE: If EXEMPT, state this as reason!
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