How are the current and future tax consequences of transactions or other events accounted for?
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How are the current and future tax consequences of transactions or other events accounted for?
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Accounting for income tax takes into account both current and future tax consequences of transactions or other events In essence AASB 112IAS 12 Prescribes the accounting treatment of the current tax consequences of transactions or other events This will normally give rise to a current tax liability The task is to determine an entitys liability for taxation in the current period based on an assessment of the entitys current taxable profit determined in accordance with the tax legislation The current tax liability is recognised by a journal entry of the following form Accounting for current tax is covered in section 134 Prescribes the accounting treatment of the future tax consequences of transactions or other events This involves an analysis of whether more or less tax will need to be paid in the future as a result of those transactions or events From this analysis the future tax consequences are accounted for as movements in deferred tax assets and deferred tax liabilities The movement in deferred future tax assets and liabilities is generally recognised by a journal entry of the following form The income tax expense is recognised as part of profit or loss unless the underlying transaction ...View the full answer
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Related Book For
Financial Reporting
ISBN: 9780730396413
4th Edition
Authors: Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes
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