Question 1 (10 Marks) Explain why income tax expense based on the tax law is usually not equal to income tax expenses calculated by using International Financial Reporting Standards. While calculating taxable income what items are typically added back to accounting profit and what items are deducted?

Question 2 (20 Marks) Ipswich Ltd is engaged primarily in agricultural pursuits as well as in forestry products, including the management of its own forest reserves. Unfortunately, in the current year an eruption of a volcano in the mountain range bordering the companys operations resulted in the destruction of 40 000 hectares of standing timber, harvested logs, forestry buildings and equipment. As a result, the company recognised a $80 million tax loss in the current period. The management of Ipswich Ltd are debating whether it can raise a deferred tax asset in relation to this loss in the financial statements for the current period. Required: Prepare a report to management providing advice on the recognition of a deferred tax asset and specifying the conditions, if any, under which the asset could be recognised.