FAC3761
, Assets / Liabilities
Carrying Amount (CA) Tax Base (TB)
Assets : Amount deductable for tax purposes against future economic
benefits (When it recovers the CA)
The amount in the statement of financial position Liabilities : CA of a liability less the amount deductible for tax purposes in the
future periods
Revenue received in advance : CA less revenue not be taxable in future.
TEMPORARY DIFFERENCE
1. Taxable Temporary difference 1. Deductible Temporary difference
Assets: CA > TB (RULE 1) Assets: CA < TB (RULE 3)
Liabilities: CA < TB (RULE 2) Liabilities: CA > TB (RULE 4)
This gives rise to a : Deferred tax liability This gives rise to a : Deferred tax asset
Journal entry: Journal entry:
Deferred tax expense (P/L) xxx Deferred asset (SFP) xxx
Deferred tax liability (SFP) xxx Deferred tax (P/L) xxx
(Provision made for deferred tax liability) (Provision made for deferred tax liability)
NB : Exemptions - IAS12 parg 15. NB : Exemptions - IAS12 parg 24.
ie 1 - 4
(ASSETS) RULE 1 = CA > TB = Taxable Temporary difference = DEFERRED TAX LIABILITY (SFP)
Journal entry: Dr Cr
R R
Deferred tax expense (P/L) xxx
Deferred tax liability (SFP) xxx
(Provision made for deferred tax expense)
Accounting purposes Tax purposes
Carrying amount: Tax base:
(Original cost - Accumulated depreciation) (Original cost - Accumulated capital allowances (Tax allowances))
Profit/Loss on sale (Capital & non-capital portions): Recoupment / Scrapping allowance:
(Proceeds on sale - CA) (Proceeds on sale (Limited to original cost) - TB)
Non-capital profit:
(Proceeds on sale (Limited to original cost) - CA)
Temporar
y
Carrying Differenc Deferred
Deferred tax on asset Amount Tax Base e tax
R R R R
Cost xxx xxx xxx
Depreciation/tax allowance xxx xxx xxx
Carrying amount/Tax base - - - -
Voorbeelde:
- Capital allowances
- Prepayments (Paid in advance)
(LIABILITIES) RULE 2 = CA < TB = Taxable Temporary difference = DEFERRED TAX LIABILITY (SFP)
Journal entry: Dr Cr
R R
Deferred tax expense (P/L) xxx
Deferred tax liability (SFP) xxx
(Provision made for deferred tax expense)
Voorbeelde:
- Construction contracts (Section 24C Allowance)
, (ASSETS) RULE 3 = CA < TB = Deductible Temporary difference = DEFERRED TAX ASSET (P/L)
(LIABILITIES) RULE 4 = CA > TB = Deductible Temporary difference = DEFERRED TAX ASSET (P/L)
Journal entry: Dr Cr
R R
Deferred asset (SFP) xxx
Deferred tax (P/L) xxx
(Provision made for deferred tax)
Voorbeelde:
- Revenue received in advance
- Warranty costs
, Assets / Liabilities
Carrying Amount (CA) Tax Base (TB)
Assets : Amount deductable for tax purposes against future economic
benefits (When it recovers the CA)
The amount in the statement of financial position Liabilities : CA of a liability less the amount deductible for tax purposes in the
future periods
Revenue received in advance : CA less revenue not be taxable in future.
TEMPORARY DIFFERENCE
1. Taxable Temporary difference 1. Deductible Temporary difference
Assets: CA > TB (RULE 1) Assets: CA < TB (RULE 3)
Liabilities: CA < TB (RULE 2) Liabilities: CA > TB (RULE 4)
This gives rise to a : Deferred tax liability This gives rise to a : Deferred tax asset
Journal entry: Journal entry:
Deferred tax expense (P/L) xxx Deferred asset (SFP) xxx
Deferred tax liability (SFP) xxx Deferred tax (P/L) xxx
(Provision made for deferred tax liability) (Provision made for deferred tax liability)
NB : Exemptions - IAS12 parg 15. NB : Exemptions - IAS12 parg 24.
ie 1 - 4
(ASSETS) RULE 1 = CA > TB = Taxable Temporary difference = DEFERRED TAX LIABILITY (SFP)
Journal entry: Dr Cr
R R
Deferred tax expense (P/L) xxx
Deferred tax liability (SFP) xxx
(Provision made for deferred tax expense)
Accounting purposes Tax purposes
Carrying amount: Tax base:
(Original cost - Accumulated depreciation) (Original cost - Accumulated capital allowances (Tax allowances))
Profit/Loss on sale (Capital & non-capital portions): Recoupment / Scrapping allowance:
(Proceeds on sale - CA) (Proceeds on sale (Limited to original cost) - TB)
Non-capital profit:
(Proceeds on sale (Limited to original cost) - CA)
Temporar
y
Carrying Differenc Deferred
Deferred tax on asset Amount Tax Base e tax
R R R R
Cost xxx xxx xxx
Depreciation/tax allowance xxx xxx xxx
Carrying amount/Tax base - - - -
Voorbeelde:
- Capital allowances
- Prepayments (Paid in advance)
(LIABILITIES) RULE 2 = CA < TB = Taxable Temporary difference = DEFERRED TAX LIABILITY (SFP)
Journal entry: Dr Cr
R R
Deferred tax expense (P/L) xxx
Deferred tax liability (SFP) xxx
(Provision made for deferred tax expense)
Voorbeelde:
- Construction contracts (Section 24C Allowance)
, (ASSETS) RULE 3 = CA < TB = Deductible Temporary difference = DEFERRED TAX ASSET (P/L)
(LIABILITIES) RULE 4 = CA > TB = Deductible Temporary difference = DEFERRED TAX ASSET (P/L)
Journal entry: Dr Cr
R R
Deferred asset (SFP) xxx
Deferred tax (P/L) xxx
(Provision made for deferred tax)
Voorbeelde:
- Revenue received in advance
- Warranty costs
