IAS 12, Income Taxes

In order to be awarded CPD units you must answer the following five random questions correctly. If you fail the test, please re-read the article before attempting the questions again.

  1. An entity has a property and uses the re-valuation model. The entity has decided that it may sell the property in the future. The property is revalued using the principles of IAS 16. There are different tax rates applicable depending on whether an entity recovers an asset through use (20%) or through sale (15%). The entity anticipates that it will recover 30% of the property`s economic benefits through use. The fair value/carrying amount of the property is $10m of which the land value is £5m. The tax base is $6m, which is split equally over land and buildings. Calculate the deferred taxation liability for the entity using the recent exposure draft (September 2010)

  2. Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be paid to or recovered from the taxation authorities. Which tax rates are used to calculate the tax liability?

  3. Why is deferred taxation accounted for in financial statements?

  4. There are exceptions from providing for deferred taxation. Which of the following events is not an exception from providing for deferred taxation? Where the temporary difference arises from:

  5. The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would follow from the manner in which the entity expects to recover or settle the carrying amount of its assets and liabilities. What is the expected manner of recovery for land with an unlimited life?

  6. Proposed amendments to IAS 12 were issued in March 2009, and the exposure draft proposed significant changes to IAS 12. Many of the proposed changes in the exposure draft were viewed as the introduction of more complex rules. What has the IASB decided to do with the content of the exposure draft?

  7. The IASB and the FASB have indicated that they will consider undertaking a fundamental review of accounting for income taxes at some time in the future. In the meantime, the IASB is undertaking a limited scope project analysing the practical issues to see which can be addressed in the shorter term. Which of the following issues is the IASB not going to focus on?

  8. The exposure draft issued in 2010 proposes an exception to the measurement principle in respect of investment property, property, plant and equipment, and intangible assets measured using the fair value model or the revaluation model in accordance with relevant IFRSs. What is the proposed exception set out in the exposure draft?

  9. When can the presumption set out in the ED of September 2010 be rebutted?

  10. Which of the following classes of assets are not covered by the exposure draft of September 2010?